Smart beta investing in the Nordic stock market
Silvasti, Veikkopekka (2020-03-23)
Julkaisun pysyvä osoite on
http://urn.fi/URN:NBN:fi-fe202003238933
http://urn.fi/URN:NBN:fi-fe202003238933
Tiivistelmä
This study explores the risk and return characteristics of different smart beta strategies in the Nordic stock markets. The aim is to investigate the risk adjusted returns of smart beta portfolios constructed to mimic value, momentum and low beta strategies. Additionally, two alternative multi-factor smart beta portfolio construction methodologies are studied to understand the benefits of factor exposure diversification.
Earlier research on smart beta strategies using data from the Nordic stock markets is fairly scarce. Particularly novel aspect is the study on the returns of two alternative multi-factor smart beta portfolio construction methodologies. Thus, this thesis complements the existing literature on smart beta by investigating the returns of different smart beta strategies and alternative portfolio construction methodologies in a novel geography.
Results indicate that value, low beta and momentum smart beta strategies have generated abnormal returns in the Nordics during the period under study. Value premium shows cyclicality, while momentum and low beta are more consistent trough time. Diversifying factor exposure from single factor to multi-factor portfolios improves the risk adjusted returns. Integrating multi-factor portfolio construction methodology is found to generate superior returns compared to mixing approach. The results are useful for investors that are considering smart beta investments in the Nordic stock market.
Earlier research on smart beta strategies using data from the Nordic stock markets is fairly scarce. Particularly novel aspect is the study on the returns of two alternative multi-factor smart beta portfolio construction methodologies. Thus, this thesis complements the existing literature on smart beta by investigating the returns of different smart beta strategies and alternative portfolio construction methodologies in a novel geography.
Results indicate that value, low beta and momentum smart beta strategies have generated abnormal returns in the Nordics during the period under study. Value premium shows cyclicality, while momentum and low beta are more consistent trough time. Diversifying factor exposure from single factor to multi-factor portfolios improves the risk adjusted returns. Integrating multi-factor portfolio construction methodology is found to generate superior returns compared to mixing approach. The results are useful for investors that are considering smart beta investments in the Nordic stock market.