Hostname: page-component-7bb8b95d7b-lvwk9 Total loading time: 0 Render date: 2024-09-18T10:04:40.634Z Has data issue: false hasContentIssue false
  • English
  • Français

Hedging the market: the performance of the FTSE 100 Share Index

Published online by Cambridge University Press:  20 April 2012

E. Dimson  and
P. R. Marsh
Get access Rights & Permissions [Opens in a new window]

Abstract

In this paper, we examine the hedging performance of the new FTSE 100 Share Index. First, we reconstruct a back-history of the monthly and daily index values using the London Share Price Database. Then we analyse the statistical characteristics of the Index, comparing it with the FT–Actuaries All Share and FT Ordinary Indexes. Finally, we examine the sources of undiversification within the FTSE Index. We conclude that the market is likely to track the FTSE Index to within a close tolerance, and that the residual tracking error is attributable partly to sector imbalances, but more importantly, to imbalances in exposure to smaller capitalization stocks.

Type
Research Article
Information
Journal of the Institute of Actuaries , Volume 111 , Issue 2 , September 1984 , pp. 403 - 430
Copyright
Copyright © Institute and Faculty of Actuaries 1984

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Bell, D. & Greenhorn, A., Eds. (1984). A Guide to the Financial Times Statistics, FT Business Information, London.Google Scholar
Blume, M. & Stambaugh, R. F. (1984). Bias in Computed Returns: An Application to the Size Effect. Journal of Financial Economics 12, 387.CrossRefGoogle Scholar
Brennan, M. J. & Schwartz, E. S. (1984). A Note on the Geometric Mean Index. Working Paper, University of British Columbia.Google Scholar
Brumwell, J. C. H. (1984). Notes on the Financial Times-Actuaries Equity Share Indices in 1983. J.I.A. 111, 203.Google Scholar
Clarkson, R. S. (1983) A Market Equilibrium Model for the Management of Ordinary Share Portfolios. J.I.A. 110, 17.Google Scholar
Cootner, P. H. (1966). Stock Market Indexes: Fallacies and Illusions. In: Lorie, J. H. and Brealey, R. A. (eds) (1978). Modern Developments in Investment Management (Second edn), Dryden Press.Google Scholar
Dimson, E. (1979). Risk Measurement when Shares are Subject to Infrequent Trading. Journal of Financial Economics 7, 197.CrossRefGoogle Scholar
Dimson, E. & Marsh, P. R. (1983). The Stability of UK Risk Measures and the Problem of Thin Trading. Journal of Finance 38, 753.CrossRefGoogle Scholar
Dimson, E. & Marsh, P. R. (1984). The Impact of the Small Firm Effect on Event Studies and the Performance of Published UK Stock Recommendations. Working Paper, London Business School, presented at the Nineteenth Annual Conference of the Western Finance Association. Vancouver (June).Google Scholar
Gustavson, S. G. (1980). Pension Plans and the Writing of Fully-Covered Exchange Traded Call Options. Journal of Risk and Insurance 47, 421.CrossRefGoogle Scholar
Haycocks, H. W. & Plymen, J. (1964). The Design, Application and Future Development of the Financial Times-Actuaries Index. J.I.A. 90, 267.Google Scholar
Haycocks, H. W. & Plymen, J. (1956). Investment Policy and Index Numbers. J.I.A. 82, 356.Google Scholar
Hemsted, J. R. (1969). One-Year Returns and the Degree of Risk. J.I.A. 95, 19.Google Scholar
Holbrook, J. P. (1977). Investment Performance of Pension Funds. J.I.A. 104, 15.Google Scholar
London Business School Financial Services (1983). Portfolio Analysis Service.Google Scholar
London Maturity Guarantees Working Party (1980). Report of the Maturity Guarantees Working Party. J.I.A. 107, 103.Google Scholar
Moore, P. G. (1972). Mathematical Models in Portfolio Selection. J.I.A. 98, 103.Google Scholar
Roll, R. (1984). On Computing Mean Returns and the Small Firm Premium. Journal of Financial Economics 12, 371.CrossRefGoogle Scholar
Schwert, G. W. (1983). Size and Stock Returns and Other Empirical Regularities. Journal of Financial Economics 12, 3.CrossRefGoogle Scholar
Wise, A. J. (1984). The Matching of Assets to Liabilities. J.I.A. 111, 445.Google Scholar