Presenter(s)

    Casey (Patrick) Casey Marsh

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    Description

    In recent years a large number of Exchange Traded Funds (ETFs) have opted for fundamentals based portfolio stock weights rather than equal-weighted or market value weighted. Fundamentals-based weighting models are often referred to as smart beta models because they create stock betas more closely aligned with a stock's intrinsic value. In this study I developed a smart beta portfolio weighting model for the SPDR Healthcare Sector. I selected the top 20 Healthcare Sector stocks by market value as my test portfolio and based on a three year moving average of earnings per share I generated portfolio weights using the inverse coefficient of variation (1/Covariation). Since (1/Cov) is essentially a return-risk ratio, I gave higher weights to stocks with higher return-risk ratios. The portfolio weighting model is re-balanced annually. Portfolio Performance is calculated for the years 2009-2017 and the benchmark is the S&P 500 ETF (SPY).

    Publication Date

    4-18-2018

    Project Designation

    Independent Research

    Primary Advisor

    Tony S. Caporale, Robert D. Dean

    Primary Advisor's Department

    Economics and Finance

    Keywords

    Stander Symposium project

    A Smart Beta Portfolio Model fo the SPDR Healthcare Sector: An Empirical Analysis, 2009-2017

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