Robust index-tracking and enhanced index-tracking in portfolio optimization

Abstract

We study index-tracking and enhanced index-tracking problems in portfolio optimization under interval uncertainty for returns and covariance matrix. The proposed robust counterparts for both models are in the form of second order cone programs. Finally, we test the models on EUROSTOXX 50 dataset. We compare the solutions of the robust models with nominal models to show the effect of uncertainty, and compare the performance of different strategies in terms of Sharpe ratio. 2020 Ascociacion Internacional de Economia Aplicada. All rights reserved.