ETF Performance Ranking by Various Measures

• Main Authors: Li-Chiang Chen, 陳利強
• Other Authors: Christine W. Lai
• Format: Others
• Language: en_US
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/34123531618696739089

碩士 === 元智大學 === 財務金融學系 === 95 === This study examines a new performance measure for Exchange Traded Funds (ETFs), called “Altar Score”. Altar Score is developed by AltaVista Independent Research for the proprietary measure of an ETF, where this new measure is based on the fundamentals of the underlying securities that comprise an ETF. This study provides a comprehensive comparison of Altar Score and various performance measures based on the ETF data in the U.S. In this study, I use adjusted Altar Score explained in this study and several traditional measures, including Sharpe ratio, Treynor ratio, single-factor Alpha, Fama and French three-factor Alpha and Carhart four-factor Alpha, to rank ETFs every year. It is found that the adjusted Altar Score has low correlation with the traditional measures. In addition, the adjusted Altar Score has significantly negative relation to next-year return of ETFs, indicating prediction power of this new measure to some extent. Furthermore, this study documents that the adjusted Altar Score provides additional information for future ETF returns that is not contained in the traditional measures. Finally, by applying the Cross-Product Ratio and Chi-Squared test, I find that the adjusted Altar Score generates a strong degree of persistence.