Active Portfolio Management

Investors who want to execute large orders always have to trade-off between price effect and opportunity cost. The purpose of this research is to investigate an optimal way to execute such orders. In this research we consider the possibility of order types and the optimal trading strategy based on the volume weighted average price (VWAP), using historical data of a share in Tehran Stock Exchange. In the simulated trading market, we also consider the price effect for large orders. The results show that for a large order on buy-side, execution strategy adopting multiple order types can perform better than those using single order type. The optimal strategy has managed to reduce the volume weighted average price (transaction costs) by 0.137 percent compared to the market.

Purpose – This article analyzes fundamental indexation in Brazil
relative to the IBrX 100 and selected stock funds in the period between
June 2003 and May 2015. This strategy relies on weights based on
fundamental indicators and not on market prices.
Design/methodology/approach – Fundamental indices built with the
IBrX 100 stocks were weighted according to fundamental indicators.
The fundamental weighting method sets the weight of each stock as
proportional to a previously determined fundament value. This article
also considers an ordinal weighting.
Findings – The results indicate that fundamental indices do not display
positive and statistically significant returns and alphas after adjusting
a five risk factor model and transaction costs. The ordinal weighting
suggests that fundamental indicator outliers do not drive results. The
evidence also suggests that fundamental indices might perform better
in bear markets.
Originality/value – In general, fundamental indices behave like value
stocks and do not present abnormal returns. This is consistent with
the absence of fundamental index products in the Brazilian market.