Portfolios - EDHEC-Risk

Indices versus Benchmarks
• The words « index » and « benchmark » are often used
interchangeably; yet they define a priori very different concepts.
• Market perspective: an index is a portfolio that should
represent the performance of a given segment of the market.
=> focus on representativity
• Investor perspective: a benchmark is a reference portfolio that
should represent the fair reward expected in exchange for risk
exposures that an investor is willing to accept.
=> focus on efficiency
• CW portfolios have long been portrayed as representative and
efficient, but have faced increased criticism on both fronts.
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