RT Journal Article
SR Electronic
T1 The Stable Roe Portfolio: An Alternative Equity Index
Strategy Based on Common Sense Security Analysis
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 135
OP 145
DO 10.3905/jpm.2014.40.5.135
VO 40
IS 5
A1 Russell J. Fuller
A1 Raife Giovinazzo
A1 Yining Tung
YR 2014
UL https://pm-research.com/content/40/5/135.abstract
AB 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