| Index / Fund | factors to consider when choosing a strategy | Full Replication | Stratified Sampling or Optimization |
| Index | # of stocks | Few (limited) | Large |
| Index | Liquidity | High | Illiquid (at least some of index constituents are illiquid) |
| Fund | Cash (as funds to invest) | Significant (huge) | |
| Fund | Tracking Error (as a result of portfolio construction) | Low | Relatively higher (compared to Full Replication) |
| Fund | Rebalancing when |
Wednesday, February 12, 2014
Passive Fund Construction Strategies: characteristic of the index and fund
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