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Title :An examination of fundamental indexation using the Euro Stoxx 50 index
Creator :Κοκκινιάς, Άγγελος
Contributor :Γιαμουρίδης, Δανιήλ (Επιβλέπων καθηγητής)
Καβουσανός, Εμμανουήλ (Εξεταστής)
Λελεδάκης, Γεώργιος (Εξεταστής)
Athens University of Economics and Business, Department of Accounting and Finance (Degree granting institution)
Type :Text
Extent :44p.
Language :en
Abstract :The purpose of this dissertation is to examine the benefits of fundamental indexation using European data. Proponents claim that the concept of fundamental indexation forms an innovative investment approach, outperforming traditional capitalization weighted schemes. A series of fundamental-weighted indices are constructed by reweighting a capitalization-weighted index based on dividends, book value, cash flow, sales, as well as a composite index. The aim is to compare the risk-return characteristics with those of the Euro Stoxx 50 index, who serves as a reference index. Using the CAPM model, together with the Fama-French three-factor model, it is tested whether a fundamental indexing strategy generates positive alpha after correcting for risk factors. The constructed fundamental-weighted indices provide positive excess returns over the reference index, during an 11-year period. However, an assessment of the risk factor exposures reveals a value tilt. When adjusting for this value tilt, and for the exposure to the small cap factor in addition to the market factor, the abnormal returns are significantly reduced. The argument that fundamental indexation, as an alternative strategy, produces superior performance against a capitalization-weighting index is not supported by empirical evidence.
Subject :Fundamental indexation
Capitalization weighting
Euro Stoxx 50 index
Date :29-07-2011
Licence :

File: Kokkinias_2011.pdf

Type: application/pdf