Abstract
Changes in benchmark composition can have considerable impact on tracking error and generally entail significant portfolio turnover if a manager wishes to maintain a given tracking error target. Russell Investments, for example, announces its index reconstitutions approximately one month before they take effect. Under these circumstances, it is possible to calculate optimal single-stock strategies for transitioning stocks into and out of a portfolio that tracks one of the Russell indices.
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Optimal Index Reconstitution Strategies
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