Abstract
The contribution of this study is twofold. First of all, we categorize index weighting schemes along the dimension of active share and show that our division of index weighting schemes into three categories -- namely enhanced, full replication and sampling approaches -- corresponds to the grouping of actual mutual funds, as shown by Cremers and Petajisto (2009). In the second part, we analyze the role of the general market environment, by means of five cross-sectional (dispersion) measures, on the degree of strategies active weight tilt. We identify clear differences regarding the sensitivity towards all of the considered metrics and, thereon confirm the necessity of a separation of weighting schemes -- commonly cataloged under the umbrella term of ‘indexing’ -- given their stark differences in investment patterns.
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call