Development of a Stable Tracking Measure for Tehran Stock Exchange

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BOTSHEKAN MOHAMMAD HASHEM; BAHROLOLOUM MOHAMMAD MAHDI; ERZA AMIR HOSSEIN; Taghikhan Tajrishi Amir

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Journal: JOURNAL OF FINANCIAL MANAGEMENT PERSPECTIVE Year:2019 | Volume:9 | Issue:3 (27) Page(s): 51-79

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Title

Development of a Stable Tracking Measure for Tehran Stock Exchange

Author(s)

BOTSHEKAN MOHAMMAD HASHEM | BAHROLOLOUM MOHAMMAD MAHDI | ERZA AMIR HOSSEIN | Taghikhan Tajrishi Amir | Issue Writer Certificate

Keywords

Index TrackingQ1

Tracking ErrorQ1

Stability of Tracking PortfolioQ1

Tracking Quality MeasurementQ1

Abstract

Because an index cannot be purchased directly, it has to be rebuilt by a portfolio which is an approximation of Index. This is called Index Tracking. In this research, first we discuss the vital role of Tracking Quality measurments for developing tracking portfolio via optimization based on sampling. Then we introduce a new measurement, Realized Tracking Quality (RTQ) and compare it with traditional measurements. Comparison of Realized Tracking Quality (RTQ) and three traditional measurements of producing tracking portfolios (Tracking Error Variance (TEV), Mean Squared Error (MSE) and Mean Absolute Deviation (MAD)) shows that there are significant differences in their anticipated values. In other words, we make a comparison of the approaches to Index Tracking and highlighting their advantages and disadvantages. Unlike other researches on rebuilding of tracking portfolio, this framework specifically addresses issues of stability of the Tracking Quality Measurements, whether they produce tracking portfolios with the same tracking quality in the estimation period and the investment period or not. In fact, we were not looking for a method that would create the best tracking portfolio with the highest tracking quality; instead, this study attempted to compare the results of the estimation period with the investment period and determine which one would be more stable. The results indicate that Producing tracking portfolio will be optimized by improving stability measurements. For our analysis, we use Tehran Stock Exchange Index having all listed companies. The time period includes 5 years, between September 2012 and September 2017.

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APA: Copy

BOTSHEKAN, MOHAMMAD HASHEM, BAHROLOLOUM, MOHAMMAD MAHDI, ERZA, AMIR HOSSEIN, & Taghikhan Tajrishi, Amir. (2019). Development of a Stable Tracking Measure for Tehran Stock Exchange. JOURNAL OF FINANCIAL MANAGEMENT PERSPECTIVE, 9(3 (27) ), 51-79. SID. https://sid.ir/paper/402447/en

Vancouver: Copy

BOTSHEKAN MOHAMMAD HASHEM, BAHROLOLOUM MOHAMMAD MAHDI, ERZA AMIR HOSSEIN, Taghikhan Tajrishi Amir. Development of a Stable Tracking Measure for Tehran Stock Exchange. JOURNAL OF FINANCIAL MANAGEMENT PERSPECTIVE[Internet]. 2019;9(3 (27) ):51-79. Available from: https://sid.ir/paper/402447/en

IEEE: Copy

MOHAMMAD HASHEM BOTSHEKAN, MOHAMMAD MAHDI BAHROLOLOUM, AMIR HOSSEIN ERZA, and Amir Taghikhan Tajrishi, “Development of a Stable Tracking Measure for Tehran Stock Exchange,” JOURNAL OF FINANCIAL MANAGEMENT PERSPECTIVE, vol. 9, no. 3 (27) , pp. 51–79, 2019, [Online]. Available: https://sid.ir/paper/402447/en

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