Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 8 (2018), No. 1, Pages 35-41

DOI: 10.12735/jfe.v8n1p35

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A Short Note on the Potential for a Momentum Based Investment Strategy in Sector ETFs

Glen A. Larsen1  Erik P. Larsen2 

1Kelley School of Business-Indianapolis, Indiana University, Indianapolis, IN, USA
2Graduate Student, TUM School of Management, Technical University of Munich, Munich, Germany

URL: https://doi.org/10.12735/jfe.v8n1p35

To Cite this Article     Article Views: 245     Downloads: 152  Since deposited on 2018-03-04

Abstract

The focus of this research is on the enhanced one-year average annual return performance of Select Sector SDPR EFFs with the highest average annual realized return over the previous five-year period [MaxRet strategy]. From 2004 through 2015, the MaxRet strategy generates a higher average annual total return than an equal weight portfolio [EW strategy] of the same sector funds. The average annual return for the MaxRet strategy is 14.13% compared to 9.75% for the EW strategy. In addition, the coefficient of variation [CV] for the MaxRet and EW strategies are 1.52 and 1.59 respectively. The MaxRet strategy, therefore, is a more efficient strategy in that it generates less standard deviation risk per unit of average annual return than the EW strategy over the study period. Measures of downside risk further support the enhanced out-of-sample performance of the MaxRet strategy.

JEL Classifications: G11

Keywords: momentum, performance enhancement, active management

To Cite this Article: Larsen, G. A., & Larsen, E. P. (2018). A short note on the potential for a momentum based investment strategy in sector ETFs. Journal of Finance and Economics, 8(1), 35-41. https://doi.org/10.12735/jfe.v8n1p35

Copyright © G. A. Larsen & E. P. Larsen

Creative Commons License
This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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A Short Note on the Potential for a Momentum Based Investment Strategy in Sector ETFs
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