ETF Research

ETF Research by academics is not as plentiful as you may expect, so has been an area rich in topics worth investigating. Below are a number of articles I have published on Exchange Traded Funds (ETFs). I hope you will find this ETF research engaging and enlightening.

What to Do When Traditional Diversification Strategies Fail: A Study on Diversification and Asset Correlation in Up and Down Markets

In 2008, market events showed that some of the protection provided by diversification is lost when correlation among asset classes changes rapidly. Now, the question is: Are traditional diversification concepts no longer applicable due to some systemic change? Or is there still a simple, repeatable approach to diversification that can lead to significant protection against loss of principle?

Many factors could be contributing to recent volatile market behavior, for example, globalization, investor fear, government policies, and alternative investments. This article explores a methodology that attempts to address these factors.

ETF Strategies to Enhance Client Wealth Maximization

This study examines the performance of pragmatic ETF-only investment strategies published either in an investment newsletter, blog, or are otherwise available through investment advisories. Our objective is to determine if ETF-only strategies can outperform either the S&P 500 or more representative benchmarks on an absolute and/or risk-adjusted basis. We surveyed a number of strategies and analyzed a subset that supported a five-year price history, including both trading commissions and bid-ask spread costs. Our findings show that while a majority of strategies beat the S&P 500 and a representative benchmark, weak statistical outperformance persisted in a smaller fraction of the sample.

Is There a Free Lunch in Commission Free ETFs?

Competition amongst discount brokers for investment dollars continues, and in recent years has reached a point where many offer commission-free exchange-traded funds (ETFs). Since minimizing costs from increased market efficiency is always of interest, commission-free ETFs may seem an obvious choice over other ETFs that carry a nominal commission. Unfortunately, other costs can play a role that can marginalize the perceived advantage of the commission-free ETFs, and in some cases, warrant the selection of an ETF that carries a commission. This study investigates how holding and transaction costs can affect the cost calculus of commission-free ETFs. The results provide a clear recommendation on how to minimize costs using commission free ETFs.[1]

Portfolio performance with inverse and leveraged ETFs

This article investigates passive investment strategies that use inverse or leveraged equity exchanged-traded funds (ETFs) in their asset allocation, and quantifies the long-term impact on portfolio performance for the purpose of improving risk-reward tradeoff.