1. ETF Consumer Cyclicals
CHUA GUI FENG
THUN JIE REN JAREN
WONG JIN QIAN DARYL
XI ZICHAO
YOU ZHIRUN

2. Consumer Cyclicals
A category of stocks that rely heavily on the business cycle and economic conditions Include many industries, such as retail, auto, construction, restaurants and entertainment. Comprised of companies that produce goods and services that people want to buy but are not essential. This sector tends to underperform most other sectors when the economy is weak, and vice versa. Top holdings in consumer cyclical ETFs include Targetm Home Depot, Amazon and Walt Disney.
trend market share to economics fluctuations

3. Consumer Cyclicals vs. Non-cyclicals
Blue line: Ford Motor co (cyclical)
Red line: Florida Public Utilities co (non-cyc)
Demostrates how each share price reacts to down turns the economy ( )

4. Brief Descriptions of 7 ETFS
TICKER
Assets
AD$V
Average Spread
Expense Ratio
FDIS
259.93M
2.65M
0.12%
0.08%
IYC
791.43M
6.33M
0.04%
0.44%
JHMC
28.45M
49.26K
0.01%
0.50%
FXD
433.19M
5.31M
0.61%
RCD
81.77M
726.94K
0.27%
0.4%
VCR
2.13b
11.83M
0.1%
XLY
12.09B
350.19M
0.05%
0.14%
ADTV = average daily trading volume

5. RECENT TRENDS
On March 11th, PGA Group, the French carmaker was buying Opel, the European operation of America’s General Motors (GM). The White House is expected to announce plans to scrap an agreement with the auto industry that sets fuel-economy standards for the nation’s cars and trucks.

6. Method of Ranking
Weighted average system based on: 1) Sharpe Ratio 2) Information Ratio 3) Variance Ratio 4) Fama-French Coefficient

7. Sharpe Ratio
Sharpe ratio is a measure for calculating risk-adjusted return.
Sharpe Ratio
Rank
FDIS-US
0.9608 5
FXD-US
0.6902 1
IYC-US
0.9728 7
JHMC-US
0.7699 3
RCD-US
0.7075 2
VCR-US
0.9645 6
XLY-US
0.8482 4

8. Information Ratio Info Ratio Rank 0.4870 7 -0.02118 5 -0.5115 1
FDIS-US
0.4870 7
FXD-US 5
IYC-US 1
JHMC-US 6
RCD-US 4
VCR-US 2
XLY-US 3
·The information ratio is a ratio of portfolio returns above the returns of a benchmark to the volatility of these returns. ·The IR measures a portfolio manager's ability to generate excess returns relative to a benchmark but also attempts to identify the consistency of the investor.
The higher the IR, the more consistent a manager, with consistency being an ideal trait. Conversely, the lower the IR, the less consistency.

9. Reasons for low Info Ratio
Tracking Error caused by:
Market capitalization weight adjustments.
Imperfect timing to adjust stocks in the ETF
Transaction costs

10. Sharpe vs Info

11. Fama-French model fit Fama-French model not a good fit in general
Adjusted R-squared
FDIS-US
0.3402
FXD-US
0.1620
IYC-US
0.3711
JHMC-US
0.3132
RCD-US
0.1992
VCR-US
0.3419
XLY-US
0.3443
Fama-French model not a good fit in general
Important to look at the significance of individual factors

12. Fama-French coefficients
Mkt-rf
t-stat
SMB
HML
intercept
FDIS-US
1.6326
2.8279
0.5521
0.8335
0.0019
0.4229
FXD-US
1.4872
1.9668
0.6529
0.7525
0.0011
0.1826
IYC-US
1.6070
3.0561
0.4920
0.8154
0.0018
0.4404
JHMC-US
1.4270
2.5670
0.8207
1.2868
0.0002
0.0542
RCD-US
1.4876
2.0104
0.6989
0.8232
0.0010
0.1790
VCR-US
1.6282
2.8578
0.5336
0.8163
0.4322
XLY-US
1.6164
2.7778
0.4531
0.6787
0.0016
0.3618
Portfolio is predominantly/has correlation with small-cap stocks and growth stocks
SMB and HML betas are not statistically significant

13. Fama-French beta ranking
Mkt-rf
Rank
FDIS-US
1.6326 7
FXD-US
1.4872 2
IYC-US
1.6070 4
JHMC-US
1.4270 1
RCD-US
1.4876 3
VCR-US
1.6282 6
XLY-US
1.6164 5
High beta stocks provides potentially higher returns due to greater volatility relative to the market
We will favour those with high beta during a bull market
Consumer cyclicals is a category of stocks that rely heavily on the business cycle and economic conditions.

14. Variance Ratio Random Walk Rejection Times Ranking FXD-US 1 JHMC-US1
JHMC-US
VCR-US 3 4
IYC-US 7
FDIS-US 2
XLY-US
RCD-US
Variance ratio (q from 2 to 10) is used to test random walk and martingale hypothesis.
The VR test statistics are based on a ratio of variance estimates of simple returns and period q return horizons. Overlapping horizons increase the efficiency of the estimator and add power to the test. The variance of the ratio depends on the degree of heteroscedasticity.
If the Variance Ratio is 1, the price series is a pure random walk. No predictions are possible and hence any trial to craete a profitable trading system on such a price series will fail.
If the Variance Ratio is larger than 1, the price series shows a tendency to form trends, i.e. changes in one direction are more often followed by changes in the same direction.
If the Variance Ratio is below 1, the price series shows some degree of mean reversion. Changes in one direction are more often followed by changes in the opposite direction.

15. OVERALL RANK TICKER Random Walk Test Sharpe Ratio
Intercept of Fama-French
Beta (Mkt-Rf)
Average
FXD-US 1 3 2
1.75
JHMC-US
1.5
VCR-US 4 6 7
5.75
XLY-US 5
FDIS-US
5.5
IYC-US
RCD-US
3.5

16. Our L/s strategy TICKER Beta (Mkt-Rf) Average L/S Strategy
Capital Allocation
FXD-US 2
1.75
Short
1.5M
JHMC-US 1
1.5
VCR-US 6
5.75
Long 1M
XLY-US 5
FDIS-US 7
5.5
IYC-US 4
RCD-US 3
3.5

17. Performance evaluation
TICKER
L/S Strategy
Capital Allocation (M)
Price (15 Mar)
Price (28 Mar)
P&L (M)
FXD-US
Short
1.5
36.90
36.48
+0.63
JHMC-US
27.35
27.38
-0.045
VCR-US
Long 1
137.66
137.72
+0.06
XLY-US
87.52
87.19
-0.33
FDIS-US
34.45
34.38
-0.07
IYC-US
159.76
159.42
-0.34
RCD-US
92.50
92.23
+0.27
Total P&L:
+0.175M

18. Thank you!