Editor’s Letter

Amenc, Goltz and Tang conducted a survey in Europe on the uses of indices in institutional investing. They present their results which showed that that liquidity, objectivity and transparency are the most important criteria investors have for indices. Potter and Schwarz examine the effects of a large-scale scandal in terms of investor behavior, reaction and impact on fund performance. This is followed by Houweling who evaluates the performance of fixed income ETFs concluding indexes consisting of bonds that are more costly to trade are more difficult to track. Mazza explores the expansion of ETFs and shifts in the macroeconomic environment to test what impact either may have on volatility and correlations. Next Haslem discusses mutual fund revenue-sharing payments concluding that they reduce fund assets and returns and should be prohibited.

Wiggins does not believe that indexing today is passive. He believes investors are using passive instruments to implement active portfolio management strategies. He questions whether the explosion of narrowly defined indexes has reached the point at which you have to ask how this differs from regular old stock picking. Next Gander, Leveau and Pfiffner examine whether or not an investor can achieve diversification effects by adding alternative indexing approaches to the traditional index portfolio. Option pricing theory is discussed by Jones and Finch as they examine price patterns of stock index options to observe how time decay affects the time portion of the option price. We conclude this issue with a study of the relationship between Gold Prices and Real GDPs of the largest gold-holding economies of the world by Sharma and Aggarwal.

We welcome your submissions. Please encourage those you know who have good papers or have made good presentations on indexing, ETFs, mutual funds or related subjects to submit them to us. We value your comments and suggestions so please email us at journals{at}investmentresearch.org.

TOPICS: Exchange-traded funds and applications, mutual fund performance, portfolio construction

Brian Bruce

Editor-in-Chief

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