Key points are not available for this paper at this time.
Although all standard equity indexes have a zero weight in cash, managers running index-tracking portfolios often find that maintaining a positive cash holding is cost-efficient. This practice saves significantly on transaction costs because temporary cash inflows and outflows can be absorbed into the cash inventory. In this paper, a mean–variance framework is used to analyze the cash management problem for an index-tracking portfolio. The theoretical model is based on passive index tracking, but it has implications for any portfolio manager with an equity benchmark and random cash inflows and outflows.
Connor et al. (Wed,) studied this question.
Synapse has enriched 2 closely related papers on similar clinical questions. Consider them for comparative context: