Daily Archives: Jul 17, 2020 at 07:04 am EDT

Research Review | 17 July 2020 | Smart Beta Revisited

The Smart Beta Mirage
Shiyang Huang (University of Hong Kong), et al.
June 2020
We document sharp performance deterioration of smart beta indexes after the corresponding smart beta ETFs are listed for investments. Adjusted by aggregate market return, the average return of smart beta indexes drops from 2.77% per year “on paper” before ETF listing to −0.44% per year after ETF listing. This performance deterioration cannot be explained by strategic timing in ETF listing nor explained by time trend in factor premia. We find evidence of data mining in constructing smart beta indexes as the post-ETF-listing performance decline is much sharper for indexes that are more susceptible to data mining in backtests. Our results caution the risk of data mining in the proliferation of ETF offerings as investors respond strongly to the stellar performance in backtests.
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Macro Briefing | 17 July 2020

New US Covid-19 cases for July 16 surged to a record high: 77,000-plus: Reuters
Fauci says new Covid treatment may arrive as early as this autumn: Bloomberg
Western nations say Russia is trying to steal coronavirus research: CNN
Hong Kong demands Taiwan officials sign ‘one China’ document: Reuters
Sliding real yields are key factor in boosting prices of risk assets: WSJ
Weekly US jobless claims continued rising last week by 1-million-plus: CNBC
US home builder sentiment rebounded in July to pre-coronavirus high: CNBC
30-year mortgage rate (US nat’l avg) falls below 3.0% for first time: NY Times
Philly Fed Mfg Index continues to reflect growth in July: Philly Fed
US retail sales rose for a second month in June but at much slower pace: Reuters