Comparative Analysis of the Performance between Smart ßETA Strategies with Active and Passive Managed ETF; To What Extent They Outperform Overall? An Empirical Study of the Performance Based on a Statistical Analysis of Historical Data between Multi-Asset Smart ßeta, Active and Passive ETF

Abstract

The Exchange Traded Fund (ETF) industry has gained much attractivity among investors in the last decade but remains still a shady market that has some technicities. This paperwork aims to address the origin of this concept and its recent tendencies by describing the main features and theoretical framework that surround it. To address the main research question, we will proceed by establishing a comparative study between Smart ßeta ETF with actively managed ETF instruments and passive ETF instruments to capture if there is an outperformance made by the Smart ßeta strategies. The primary approach for this research is to compute the overall daily returns over a 1-year timeframe1. Several ETF instruments will complete our study group with fifty-one different ETF funds. The overall risk-adjusted returns are computed according to the three main ratios: Sharp, Sortino and Jensen ratio. The first part will serve as a literature review of the critical theoretical concepts to enable the reader to achieve a good base understanding of the topic. The second part will be based on an empirical study to present our findings on this subject. In the end, we will offer a general conclusion that rewinds all the significant contributions on this topic with some recommendations. After studying the performance of fifty-one ETFs, we concluded, as in previous studies, that Smart Beta funds do not offer a risk-adjusted performance superior to active and passive strategies. NB: The data could be altered by the global COVID-19 pandemic and may be biased in term of representativity of the overall state of the market., inducing higher volatility than could impact the neutrality of this analysis.