Abstract:
A Framework for Enhanced Indexing in the Brazilian Stock Market
Enhanced indexing is a hybrid fund management style that presents elements
of both the active and the passive investment styles. This work presents the
basic principles of enhanced indexing fund management, and proposes a
methodology to generate the set of its efficient portfolios. Important
operational details for practitioners are addressed, such as choosing an
appropriate market risk measure, and the mathematical formulation of the
optimization models used to generate the set of efficient portfolios. The
practical use of enhanced indexing fund management is illustrated in the
Brazilian stock market.