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http://dx.doi.org/10.29214/damis.2018.37.4.004

Smart Beta Strategies based on the Quality Indices  

Ohk, Ki Yool (Department of Business Administration, Pusan National University)
Lee, Minkyu (Institute of Management Research, Pusan National University)
Publication Information
Management & Information Systems Review / v.37, no.4, 2018 , pp. 63-74 More about this Journal
Abstract
Recently, in the asset management industry, the smart beta strategy, which has an intermediate nature between passive and active strategies, is attracting attention. In this smart beta strategy, value, momentum, low volatility, and quality index are widely used. In this study, we analyzed the quality index which is not clear and complicated to calculate. According to the MSCI methodology, the quality index was calculated using three variables: return on equity, debt to equity, and earnings variability. In addition, we use the index using only return on equity variable, the index using only two variables of return on equity and debt to equity, and the KOSPI index as comparison targets for the quality index. In order to evaluate the performance of the indices used in the analysis, the arithmetic mean return, the coefficient of variation, and the geometric mean return were used. In addition, Fama and French (1993) model, which is widely used in related studies, was used as a pricing model to test whether abnormal returns in each index are occurring. The results of the empirical analysis are as follows. First, in all period analysis, quality index was the best in terms of holding period returns. Second, the quality index performed best in the currency crisis and the global financial crisis. Third, abnormal returns were not found in all indices before the global financial crisis. Fourth, in the period after the global financial crisis, the quality index has the highest abnormal return.
Keywords
Smart beta; Quality index; Global financial crisis; Abnormal return;
Citations & Related Records
Times Cited By KSCI : 1  (Citation Analysis)
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