| dc.description.abstract | In this paper, We adopt Lo(2008) using simple factors, include value, growth, profitability, momentum, and technical factors, to rank stocks and standard methods for constructing enhanced index funds based on these rankings. The investment goal of enhanced index funds is to acquire more returns than benchmark and restrict the tracking error less than 2 percent. The portfolios using different strategies rebalance on a monthly basis. The empirical results show that: (1) Except for the price momentum strategy, the performance of enhanced index funds built from traditional value factor, relative value factor, historical growth factor, profit trends factor, accelerating sales factor, price reversal factor, and small size factor do better than Taiwan Capitalization Weighted Stock Index(TWSI) and the benchmark we construct in the paper in average yearly returns. (2) Examining the Sharp ratio of all strategies, we find traditional value factor, relative value factor, price reversal factor, sales accelerating factor and small size factor do better than TWSI and the benchmark which we construct. (3) Considered the information ratio, The top three are the enhanced fund built from price reversal factor, traditional value factor and small size factor. (4) The average yearly return from the enhanced index built from composite strategy is higher than TWSI by 2.41 percent .
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