Burgess, Richard C.; O'Dell, Bruce T.
March 1978
Journal of Financial & Quantitative Analysis;Mar1978, Vol. 13 Issue 1, p93
Academic Journal
Previous academic research has frequently utilized indexes as a basis of comparison. Index funds which are currently being implemented by the practitioner have stirred quite a controversy. This study has indicated that for the February-1973-through-the-September-l975 period, there are two indexes in both the E-V and SD efficient sets when comparison is indexes versus E-V portfolios, and in addition, only one common stock out of 40 dominates those two indexes. Given these results and those of previous empirical work, the performance of an index fund or a pension fund based on the DJIA or the S&P 500 would be superior not only to mutual funds but also to individual stocks and E-V efficient portfolios. This is not to imply that all mutual funds or pension funds should be matched to an index. The final selection of an efficient investment should depend on either the exact specification of investors' utility function or the specific needs of the pension fund. Some investors will select a fund based on an index, but there are certainly others with different preferences for risk and return.


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