Performance of Smart Beta : evidence from the Helsinki stock exchange
Tolonen, Iiro (2019-05-12)
Performance of Smart Beta : evidence from the Helsinki stock exchange
(12.05.2019)
Julkaisu on tekijänoikeussäännösten alainen. Teosta voi lukea ja tulostaa henkilökohtaista käyttöä varten. Käyttö kaupallisiin tarkoituksiin on kielletty.
suljettu
Julkaisun pysyvä osoite on:
https://urn.fi/URN:NBN:fi-fe2019052116412
https://urn.fi/URN:NBN:fi-fe2019052116412
Tiivistelmä
”Smart Beta” has been intriguing the long-term investing community for the past decade. Asset pricing factors researched in financial literature have been combined with exchange-traded funds and created a product called the Smart Beta ETF. With benefits combined from both traditional passive and active mutual funds, the alternative form of investing promises higher returns or lower risk than passive funds and with fees below active mutual funds.
Prior academic factor investing simulations and the actual performance of newly created Smart Beta ETF’s have shown appealing results in international markets. This study evaluates the performance of Smart Beta strategies in the Helsinki stock exchange between 1.1.2003 and 1.7.2018. This study finds similar results in a market without prior extensive research in the topic and with no current Smart Beta products available to investors.
The five common Smart Beta strategies chosen for this study, Size, Value, Momentum, Low-volatility and Dividend produce higher total and risk-adjusted returns than the comparison market index OMXH during the studies observation period. The Value, Momentum and Dividend exploiting portfolios produce returns substantially higher than the market and rest of the Smart Beta portfolios. The outperformance of the strategies is partially explained by the traditional asset pricing factors size, value and sensitivity to market risk, but the main explanative value seems to be in the method of equal-weighting of portfolios, a method which is commonly utilized in Smart Beta products.
Even after controlling for size, value and systematical equal-weighting and re-balancing of the portfolios, one out of the five portfolios in the study show ability to produce abnormal returns compared to the traditional asset pricing models. The portfolio exploiting the Dividend strategy was able to create the highest risk-to-reward premiums combining high returns with lower risk relatively consistently compared to the benchmarks.
Prior academic factor investing simulations and the actual performance of newly created Smart Beta ETF’s have shown appealing results in international markets. This study evaluates the performance of Smart Beta strategies in the Helsinki stock exchange between 1.1.2003 and 1.7.2018. This study finds similar results in a market without prior extensive research in the topic and with no current Smart Beta products available to investors.
The five common Smart Beta strategies chosen for this study, Size, Value, Momentum, Low-volatility and Dividend produce higher total and risk-adjusted returns than the comparison market index OMXH during the studies observation period. The Value, Momentum and Dividend exploiting portfolios produce returns substantially higher than the market and rest of the Smart Beta portfolios. The outperformance of the strategies is partially explained by the traditional asset pricing factors size, value and sensitivity to market risk, but the main explanative value seems to be in the method of equal-weighting of portfolios, a method which is commonly utilized in Smart Beta products.
Even after controlling for size, value and systematical equal-weighting and re-balancing of the portfolios, one out of the five portfolios in the study show ability to produce abnormal returns compared to the traditional asset pricing models. The portfolio exploiting the Dividend strategy was able to create the highest risk-to-reward premiums combining high returns with lower risk relatively consistently compared to the benchmarks.