Is it better for a bond index to be able to change every day, or only every month? This paper discusses the pros and cons of each approach, using examples taken from the FTSE Canada Universe Bond Index, which rebalances daily, and a specially created equivalent series that uses the same methodology, except that it rebalances monthly.

This paper will:

  • Assess the impact of daily vs. monthly rebalancing on the FTSE Canada Universe Bond Index from 2004 to 2019
  • Compare daily vs. monthly rebalanced indexes for both government and corporate sub-indexes
  • Analyze the tracking error of indexes with daily and monthly rebalancing