The Empirical Study Of Index Investment Basedon Tracking Error

Indexing investment, which refers to the replication and tracking a stock market index for the goal, is a pattern which achieves an average return of stock market through the full decent ralization and passive management to the smallest of transaction costs. the indexing investment is a passive investment strategy, and corresponding to the positive investment which is through active research and analysis to achieve excess return of stock market. Along with the constant development of securities investment fundsand stock market index system continuously improve,the index fund become an important investment tools. There is an important theoretical andacademic value to get an accurate understanding of the meaning ofindexing investment and study its applicability in china's capital markets.This paper elaborates the conception of the Indexing investment, the generation and development of Indexing investment and the processes of Indexing investment. Analyses the conception of tracking error and the traditional measure of tracking error. It takes the first exchange-traded fund—50ETF as an example to illustrate the method ang calculation steps. This paper discusses in detail how to minimize the tracking error under the conditions of the construction and management of index portfolios, including the initial portfolio construction and portfolio management at the process of dynamic adjustment of the stock components of the timing of selection and combination of China's securities market to carry out an empirical study to test the use of empirical data on whether our country can be such as the nature of the foreign data better results.The conclusions of this paper are mainly as follows. First, investors in the design of the objective function and tracking error measurement method time to weigh the pros and cons to choose their own investment objectives of the algorithm model and the tracking error of the measurement method; Secondly, some tracking error based on the smallest model of the algorithm is feasible in China's securities market, investment results and performance simulation evaluation shows that the portfolio with the goal of a better index of the degree of fit. Comparatively speaking, MAD model was a better investment formance.