Title

European Indexes: Do they behave like managed mutual funds?

Presentation Type

Presentation

Abstract

The financial metric “alpha” has been utilized in the past as a metric intended to describe whether a portfolio of an actively managed portfolio has under or over performed the market on a risk-adjusted basis. Using this measure, I intend to analyze a series of European indexes with the intention of discovering any statistically significant anomalies. Using modern portfolio theory as a guide, all indexes to be analyzed must have an alpha of zero. The presence of this situation signifies that there has been no active management of the securities that make up this index and that there are neither positive or negative performance results when compared to a broader measure of the market. This analysis will be conducted by performing a series of regressions with a four factor model brought forth by Professors Fama and French and later modified by Carhart. The monthly performance statistics will be regressed against the factors of: high minus low performance results, small minus big capitalized stocks, a momentum factor that measures the tendency of people to hold onto winners while selling the losers, and a measure of market performance minus the risk-free rate.

Category

Social Sciences

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European Indexes: Do they behave like managed mutual funds?

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The financial metric “alpha” has been utilized in the past as a metric intended to describe whether a portfolio of an actively managed portfolio has under or over performed the market on a risk-adjusted basis. Using this measure, I intend to analyze a series of European indexes with the intention of discovering any statistically significant anomalies. Using modern portfolio theory as a guide, all indexes to be analyzed must have an alpha of zero. The presence of this situation signifies that there has been no active management of the securities that make up this index and that there are neither positive or negative performance results when compared to a broader measure of the market. This analysis will be conducted by performing a series of regressions with a four factor model brought forth by Professors Fama and French and later modified by Carhart. The monthly performance statistics will be regressed against the factors of: high minus low performance results, small minus big capitalized stocks, a momentum factor that measures the tendency of people to hold onto winners while selling the losers, and a measure of market performance minus the risk-free rate.