Você está na página 1de 6

The Revenge of the Stock Pickers (In Practice) https://www.cfainstitute.org/en/research/financial-analysts-journal/2019/i...

Log In

Search

Programs
Programs
CFA Program
CFA Program
Benefits
Curriculum
Exam Information
Scholarships
Register
Registered Candidate Resources
Employer Benefits
CIPM Program
CIPM Program
Benefits
Curriculum
Exam Information
Scholarships
Register
Registered Candidate Resources
Employer Benefits
Investment Foundations Program
Investment Foundations Program
Benefits
Curriculum
Exam Information
Register
Registered Candidate Resources
Employer Benefits
Compare Our Programs
Membership
Membership
Become a Member
Become a Member
Professional References
Work Experience Guidelines
Member Benefits

1 of 6 5/29/2019, 10:47 PM
The Revenge of the Stock Pickers (In Practice) https://www.cfainstitute.org/en/research/financial-analysts-journal/2019/i...

Member Benefits
Members App
Marketing Resources for CFA Charterholders
Waivers
Membership Renewal
Member Directory
Volunteer
Volunteer
Volunteer Opportunities
Career Resources
Continuing Professional Development
Continuing Professional Development
Continuing Education (CE) Program
CIPM Mandatory Continuing Education (MCE) Program
Professional Development Resources
Browse the Collection
Societies
Societies
Find a Society
Join a Society
Launch a New Society
Research Challenge
Research Challenge
Get Involved
Past Champions
Student Preparation
Events
Events
CFA Institute Conferences
Webinars
Event Sponsorship
Ethics & Standards
Ethics & Standards
Codes, Standards & Guidelines
Codes, Standards & Guidelines
Code of Ethics and Standards of Professional Conduct
Asset Manager Code
GIPS Standards
Ethical Decision Making
Professional Conduct Program
Professional Conduct Program
Disciplinary Process
Professional Conduct Statement
Report Misconduct
Member and Candidate Sanctions
Advocacy
Advocacy
Benchmarking & Accreditation

2 of 6 5/29/2019, 10:47 PM
The Revenge of the Stock Pickers (In Practice) https://www.cfainstitute.org/en/research/financial-analysts-journal/2019/i...

Consultation Paper Responses


Comment Letters
Research & Analysis
Research & Analysis
Financial Analysts Journal
Financial Analysts Journal
Editorial Team
Graham and Dodd Awards
Future of Finance
Future of Finance
Women in Investment Management Initiative
Research Foundation
Research Foundation
Research Foundation Publications
Board of Trustees
Leadership Circle
James R. Vertin Award
Donate to the Research Foundation
About
About
Mission & Vision
Mission & Vision
Let's Measure Up
Governance
Governance
Leadership
Annual Report
Compensation Philosophy
Committees & Councils
Corporate Documents & Policies
Press Room
For Employers
For Employers
Why Hire a CFA Charterholder?
For Universities
For Universities
Investment Foundations Academic Program
Professors
University Affiliation Program
Corporate Citizenship
Careers at CFA Institute

Log In
Create an Account

1. CFA Institute
2. Research & Analysis
3. Financial Analysts Journal

3 of 6 5/29/2019, 10:47 PM
The Revenge of the Stock Pickers (In Practice) https://www.cfainstitute.org/en/research/financial-analysts-journal/2019/i...

4. The Revenge of the Stock. . .

Financial Analysts Journal 12 March 2019

The Revenge of the Stock Pickers (In Practice)


Phil Davis

Abstract
This In Practice piece gives a practitioner's perspective on the article "The Revenge of the Stock Pickers," by
Hailey Lynch, Sébastien Page, CFA, Robert A. Panariello, CFA, James A. Tzitzouris, Jr, and David Giroux,
CFA, published in the Second Quarter 2019 issue of the Financial Analysts Journal.

How Do the Authors Tackle the Issue?


The authors test their theory that constituents of ETFs react very differently to negative news, with some more
resistant to macro shocks than others. They create a simple trading strategy that buys oversold index
constituents when an ETF’s price falls amid a market panic caused by negative news flow about a sector or a
prominent stock within that sector.

The authors analyse two broad market ETFs (the S&P 500 Index and small cap) and nine sector ETFs. Across
the 11 ETFs, a total of 240 volume spikes are noted over an eight-year period. After each volume spike that
results in falls in an ETF’s price, the methodology is to buy the “outsiders”—the ETF constituents with a low
beta to the overall ETF. That is, their prices move less in tandem with the ETF than its other constituents.

These outsiders are all held for 40 days, and the authors measure the alpha produced from the first to the 40th
day after the volume spike, with the results shown both before and after trading costs.

What Are the Findings?


During ETF volume spikes, the correlations between the prices of companies within each ETF increase, despite
clear differences in the fundamentals of the companies and despite some companies having little exposure to the
ETF theme. The authors refer to this as a “correlation bubble.”

For example, after a September 2015 tweet by then presidential candidate Hillary Clinton in which she
announced that she intended to cap prices of some pharmaceuticals, there was a rapid sell-off in health care
ETFs. Although the prices of health care ETFs plummeted after her announcement, the stocks of some non-
pharmaceutical companies rebounded strongly in the 40 days thereafter.

If investors buy ETF “outsiders,” immediately after a spike in volume and lever them to the same beta as the
ETF, they are likely to benefit from reversion of the prices for a full 40 days. Although the average alpha on the
first day after a surge in ETF sales volumes is slightly negative, over the next 39 days the average daily alpha is
generally positive.

This strategy is profitable in the S&P 500 ETF and in the small-cap ETF, as well as in eight of the nine sector
strategies—consumer discretionary, consumer staples, energy, financials, health care, industrials, materials, and

4 of 6 5/29/2019, 10:47 PM
The Revenge of the Stock Pickers (In Practice) https://www.cfainstitute.org/en/research/financial-analysts-journal/2019/i...

utilities. The technology sector is the exception.

The highest returns after 40 days are found in the financials ETF, which produced alpha of nearly 8%. Applying
the strategy to the S&P 500 ETF creates returns of around 6%. The technology ETF produces losses of around
3% 40 days after the market panic and subsequent spike in ETF trading volumes.

What Are the Implications for Investors and Investment Managers?


There seems to be a clear return opportunity for stock pickers who buy “outsider” stocks that are swept along in
the high-volume selling of sector or thematic ETFs.

The strategy requires only the ability to measure a stock’s beta relative to its ETF and lever a portfolio of
outsider stocks to the same beta as the ETF. Stock pickers with greater insight into fundamental valuations may
be able to obtain even higher returns than this simple strategy presents.

For ETF investors, the mispricing during volume spikes of the companies that comprise an ETF may represent a
hitherto unknown cost of ETF investing. But the authors note that it takes many types of investors with different
motivations to provide liquidity to capital markets, which in turn provides more appropriate pricing.

What's the Investment Issue?


Exchange-traded funds (ETFs) account for nearly a third of trading volumes in the United States, up from less
than 2% in 2000. This sharp rise in volume may leave ETF investors vulnerable to getting “picked off” by
active investors when trading in ETFs is particularly heavy.

ETFs enable investors to express top-down views on markets and sectors without paying attention to the relative
merits of the stock fundamentals within each market or sector. This may create opportunities for stock pickers
when ETF constituents are rapidly oversold.

The authors investigate what happens to the prices of the constituent stocks of an ETF after a strong sell-off in
the ETF.

They reason that ETF investors are agnostic to stock-specific information, so they “throw the baby out with the
bathwater,” effectively handing returns on less correlated constituents to stock pickers.

About the Author(s)


Phil Davis

Phil Davis is a London-based financial journalist.

Related

Original Research Article

0.25 CE

Record CE

5 of 6 5/29/2019, 10:47 PM
The Revenge of the Stock Pickers (In Practice) https://www.cfainstitute.org/en/research/financial-analysts-journal/2019/i...

Manage your Continuing Education credits

Categories

Investment Management Strategies

Active Management

Investment Products & Asset Classes

Investment Funds

Additional Information

Published by CFA Institute

Contact Us
Report Misconduct By a Member or Candidate
Careers at CFA Institute
CFA Institute Privacy Policy
Legal Terms and Conditions of Use
Sitemap
© 2019 CFA Institute. All Rights Reserved.

We’re using cookies, but you can turn them off in Privacy Settings. If you use the site without changing
settings, you are agreeing to our use of cookies. Learn more in our Privacy Policy. Priv acy Settings

6 of 6 5/29/2019, 10:47 PM

Você também pode gostar