The spreadsheet, Report 2.xlsx contains data on four Australian smart beta exchange traded funds (ETFs) from June 2011 to April 2016. Each of these ETFs is passive as they attempt to track their chosen benchmark index, but they also have an active element given the strategy they are using. The four ETFs are using a ‘Dividend Screened' strategy. The contents of each worksheet in the spreadsheet are:
- ETFs: contains monthly returns for the four smart beta ETFs. All monthly returns include both capital gains and dividend payments.
- Factor Returns: contains monthly returns on the risk-free rate (RF), the S&P/ASX300 index (ASX300), a size factor (SMB), a value factor (HML), and a dividend factor (DYF). The dividend factor is the difference in return between a portfolio of stocks with the highest dividend yield and a portfolio of stocks with the lowest dividend yield. The portfolios are formed at 31 December each year and then held for the following 12 months. The portfolio returns are market-cap weighted. The high yield portfolio contains 50 stocks and the low yield portfolio contains 250 stocks.
The table below details each of the four ETF's name, stock market ticker, benchmark and benchmark abbreviation. You can use the ticker and benchmark abbreviation in your report to limit your word count.
FTSE
You are required to write a report pitching to a prospective investor which of the four ETFs that you would recommend they invest in, and why. You will need to address the following points in your report:
1. What are the different strategies used by the four ETFs? How are the ETFs' portfolios constructed? Discuss the similarities and differences.
2. Analyse and discuss the differences in performance among the four ETFs.
3. Do you believe that each ETF is delivering on its objectives? Why or why not?
4. Discuss two limitations/risks that investors would need to consider when investing in these high dividend yield ETFs? Focus on the four ETFs collectively, not individually.
5. You should discuss current market events in your report and how this would relate to performance of the ETFs in the past, and in the future.
6. You should conclude your report by providing a recommendation as to which of the four ETFs you would recommend for a prospective investor. You will need to provide detailed reasons why you have recommended this particular ETF and not the other three
ETFs.
Please note the following:
- You are expecting to draw upon many different aspects of the unit when undertaking this report.
- You are welcome to undertake analysis of data that is not contained in the Report 2 spreadsheet.
- You will need to undertake research to support your conclusions. Please cite any references.
- Marks will be evenly allocated to the calculations you undertake, the research you conduct and how detailed your overall analysis is in supporting your conclusion.
Please use graphs and/or tables to support your discussion. Please do not include the raw data in the appendix. Please use 12pt font with 2cm margins and include all references in a bibliography. Excel spreadsheets need to be submitted via the link in Blackboard. Written
reports should be submitted via Turnitin.