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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
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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.

Information

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

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