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Establishing Sector Weights for the UD Flyer Fund: A Quantitative Approach Since stocks in the Flyer Fund are grouped by S&P Sectors, an important factor in the Fund’s performance is the portfolio weight given to each sector. To a large extent, sector weights depend on the Flyer Fund investment team’s evaluation of U.S. macro-economic conditions as well as monetary/fiscal policy initiatives by the U.S. Government. The decision to over or under weight a given sector, however, is based more on intuition and subjective judgment than empirical analysis. The purpose of this study, therefore, is to develop a more objective framework for sector weightings with particular emphasis on the relationship between macro-economic activity and sector price movement. In essence, the hypothesis that I am testing is that sector price movements vary directly with the expansion and contraction of economic activity. As a measure of economic activity I chose to use the Chicago Fed’s National Activity Index (CFNAI). CFNAI is a weighted average of 85 macro-economic indicators and is considered by business economists to be a reliable indicator of U.S economic expansions and contractions. I will use the S&P sector ETF’s to obtain sector prices and price movements.

Publication Date

4-9-2014

Project Designation

Independent Research

Primary Advisor

Robert Dean, Trevor Collier

Primary Advisor's Department

Economics and Finance

Keywords

Stander Symposium poster

Disciplines

Arts and Humanities | Business | Education | Engineering | Life Sciences | Medicine and Health Sciences | Physical Sciences and Mathematics | Social and Behavioral Sciences

Establishing Sector Weights for the UD Flyer Fund: A Quantitative Approach

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