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The Stable Roe Portfolio: An Alternative Equity Index
Strategy Based on Common Sense Security Analysis

Russell J. Fuller, Raife Giovinazzo and Yining Tung
The Journal of Portfolio Management Special 40th Anniversary Issue 2014, 40 (5) 135-145; DOI: https://doi.org/10.3905/jpm.2014.40.5.135
Russell J. Fuller
is the chief investment officer at Fuller & Thaler Asset Management in San Mateo, CA.
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Raife Giovinazzo
is the director of research at Fuller & Thaler Asset Management in San Mateo, CA.
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Yining Tung
is an investment analyst at Fuller & Thaler Asset Management in San Mateo, CA.
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  • For correspondence: info@fullerthaler.com
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Abstract

Alternative equity index strategies are a variation of passive indexing, where the “index” is based on initial active decisions as to how to create the universe of stocks, the stocks’ weights, and the rebalance procedure, and then passively follow these procedures forward through time. The authors of this article replicate prior research that shows popular alternative indexes, such as fundamental indexing and minimum volatility, have higher returns and Sharpe ratios than the S&P 500. They present a new alternative index that creates a portfolio with the lowest predicted volatility of return on equity (ROE), the “stable ROE portfolio.” The stable ROE portfolio delivers higher and more stable earnings, and higher returns and Sharpe ratios than other alternative indexes or the S&P 500.

TOPICS: Passive strategies, equity portfolio management, in portfolio management

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The Journal of Portfolio Management: 40 (5)
The Journal of Portfolio Management
Vol. 40, Issue 5
Special 40th Anniversary Issue 2014
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The Stable Roe Portfolio: An Alternative Equity Index
Strategy Based on Common Sense Security Analysis
Russell J. Fuller, Raife Giovinazzo, Yining Tung
The Journal of Portfolio Management Sep 2014, 40 (5) 135-145; DOI: 10.3905/jpm.2014.40.5.135

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The Stable Roe Portfolio: An Alternative Equity Index
Strategy Based on Common Sense Security Analysis
Russell J. Fuller, Raife Giovinazzo, Yining Tung
The Journal of Portfolio Management Sep 2014, 40 (5) 135-145; DOI: 10.3905/jpm.2014.40.5.135
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  • Article
    • Abstract
    • REPLICATING THE CHOW ET AL. [2011] RESULTS
    • SRP, A NEW ALTERNATIVE EQUITY INDEX
    • COMPARING SRP TO OTHER ALTERNATIVE EQUITY INDEX STRATEGIES
    • OUT-OF-SAMPLE RESULTS
    • WHY SRP WORKS
    • CONCLUSIONS
    • APPENDIX A
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF

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