A Guide to Equity Index Construction (2nd edition)

Daniel Broby returns with a fully updated second edition of his 2007 book, A Guide to Equity Index Construction. Combining years of practical fund-management experience as a CEO, CIO and chief portfolio manager with his abundant academic knowledge, Broby provides the definitive reference book in the field of equity index construction and financial benchmarking.

This new edition is a must-read for anyone working with investment funds, from fund managers to analysts. Readers will be equipped to construct an optimal equity index– and crucially – understand the nature of an underlying return series.

Broby’s comprehensive guide tackles two critical challenges in benchmarking: selecting the right stocks for inclusion and determining their optimal weights.

After discussing the history behind indices, and concepts such as “quadratic optimization,” the author offers practical insights into the fundamentals of benchmarking, modern portfolio theory, sampling and asset selection. The book also covers the intricacies of making an index investable, handling data, and managing industry, country, and currency exposures.

By the end of Broby’s book, readers will have a holistic understanding of benchmarking practices and the confidence to construct and maintain indices that meet the demands of modern financial markets. Whether you’re a student or a practitioner, this is your essential resource for mastering the science of index construction.