Constrained Index Tracking under Loss Aversion Using Differential Evolution

@inproceedings{Maringer2008ConstrainedIT,
  title={Constrained Index Tracking under Loss Aversion Using Differential Evolution},
  author={Dietmar Maringer},
  booktitle={Natural Computing in Computational Finance},
  year={2008}
}
Index tracking is concerned with forming a portfolio that mimics a benchmark index as closely as possible. Traditionally, this implies that the returns between the index and the portfolio should differ as little as possible. However, investors might happily accept positive deviations (ie, returns higher than the index’s) while being particularly concerned with negative deviations. In this chapter, we model these preferences by introducing loss aversion to the index tracking problem and analyze… CONTINUE READING