What Is an Index?

  title={What Is an Index?},
  author={Andrew W. Lo},
  journal={The Journal of Portfolio Management},
  pages={21 - 36}
  • A. Lo
  • Published 31 January 2016
  • Economics
  • The Journal of Portfolio Management
Technological advances in telecommunications, securities exchanges, and algorithmic trading have facilitated a host of new investment products that resemble theme-based passive indexes, but depart from traditional market-cap-weighted portfolios. In this article, the author proposes broadening the definition of an index using a functional perspective. Any portfolio strategy that satisfies three properties should be considered an index: (1) it is completely transparent, (2) it is investable, and… 

Portfolio Selection With Active Strategies: How Long Only Constraints Shape Convictions

We explore in this paper the drivers of equity portfolio selection with an active strategy, to be understood as the combination of the use of a rewarded factor as an expected return, and a risk

An Approach for the Relationship Analysis between Social Events and the Stock Market during the Pandemic

COVID-19 is the latest among the many pandemics in the last few decades in the world, and it has stricken the global economy severely. It has consequently affected the stock market, which affects the

How Hard Is It to Pick the Right Model? MCS and Backtest Overfitting

This work evaluates the performance of the novel model confidence set (MCS) introduced in Hansen et al. (2011a) in a simple machine learning trading strategy problem and finds that MCS is not robust to multiple testing and it requires a very high signal-to-noise ratio to be utilizable.

Manifold feature index: A novel index based on high-dimensional data simplification

Exploration of a Composite Index to Describe Magnetospheric Activity: Reduction of the Magnetospheric State Vector to a Single Scalar

Geomagnetic activity is usually gauged by a single time‐dependent geomagnetic index. One drawback is that an individual geomagnetic index measures only one aspect of the activity in the Earth's



Fundamental Indexation

A trillion-dollar industry is based on investing in or benchmarking to capitalization-weighted indexes, even though the finance literature rejects the mean–variance efficiency of such indexes. This

Can Hedge-Fund Returns Be Replicated?: The Linear Case

In contrast to traditional investments such as stocks and bonds, hedge-fund returns have more complex risk exposures that yield additional and complementary sources of risk premia. This raises the


An intertemporal model for the capital market is deduced from the portfolio selection behavior by an arbitrary number of investors who aot so as to maximize the expected utility of lifetime

The Case for an Unmanaged Investment Company

An "unmanaged investment company" is one that is dedicated to following a representative average. The need for such firms has arisen because of the tremendous growth in investment firms—to the point

Adaptive Markets and the New World Order

The traditional investment paradigm is based on several key assumptions including rational investors, stationary probability laws, and a positive linear relationship between risk and expected return

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street

Justin Fox, a former Time magazine business journalist and current Editorial Editor for the Harvard Business Review Group, started The Myth well before the current financial crisis erupted, but its

On the Application of the Continuous-Time Theory of Finance to Financial Intermediation and Insurance

The core of financial economic theory is the study of the micro behavior of agents in the intertemporal deployment of their resources in an environment of uncertainty. Economic organizations are