Presenter(s)

    Daniel Robert Caponi, Rory T. Houser

    Download

    Download Project (327 KB)

    Description

    The two major approaches to weighting market indexes are price weighting (DOW) and market cap weighting (S&P 500). In this study, we use a Smart Beta approach by weighting stocks based on their fundamental and earnings growth characteristics. Using price to earnings, price to book, price to sales, and price to cash flow measures plus expected one year earnings growth, we weight the top 10 holdings of the SPDR Consumer Discretionary ETF (XLY) and compare their performance as a portfolio of stocks to XLY, the DOW, and the S&P 500 for the year 2014. Two weighting strategies are used. A momentum strategy which gives higher weights for higher price-to metrics, and a relative value strategy which gives higher weights to stocks whose inverted price-to's are higher. The concentrated portfolio begins in 2014 with a beginning value of $5,000,000.

    Publication Date

    4-9-2015

    Project Designation

    Independent Research

    Primary Advisor

    Trevor C. Collier

    Primary Advisor's Department

    Economics and Finance

    Keywords

    Stander Symposium project

    Disciplines

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

    A Smart Beta Approach to Portfolio Weighting for a Concentrated Portfolio of Consumer Discretionary Stocks

    Share

    COinS