The performance of Enhanced Return Index Fund

• Main Authors: Yueh-Chung Chu, 朱岳中
• Other Authors: An-Sing Chen
• Format: Others
• Language: en_US
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/97812175443219294295

博士 === 國立中正大學 === 財務金融所 === 95 === Parte.I This paper analyzes the relative predictability of alternative S&P 500 index funds. Our data contain enhanced return index funds and traditional non-enhanced index funds. Results show that enhanced return index funds have higher predictability than non-enhanced index funds. We then generate out-of-sample forecasts and apply trading strategies to further analyze the extent and economic significance of predictability. The additional tests show existence of trading strategies using enhanced index funds that can outperform the market even after accounting for transaction costs. Overall, results indicate that investors can benefit by utilizing trading strategies that exploit the higher predictability of enhanced return index funds over non-enhanced index funds and, thus, enhanced return index funds should not be overlooked when investors consider investing in index funds. Part II This paper further analyzes the performance of the enhanced return index funds over the January 1996 to March 2007 period by a new bootstrap statistical technique. We apply Carhart (1997) unconditional and Ferson and Schadt (1996) conditional four-factor regression model and Kosowski, Timmermann and Wermers (2006) bootstrap technique to examine the performance of the funds. The results show the managers of enhanced-return index funds have significant pick stock skill.