1. INVESTMENT & FINANCIAL DATA ANALYSIS (QF302)
KENNETH | ROOBAN | SELINA | YANATON | YUN JIE

2. Less sensitive to business cycle fluctuations
HEALTHCARE SECTOR |
OVERVIEW
Defensive stocks
Less sensitive to business cycle fluctuations
Hospital Management Firms
US$ 9.59 Trillion
35 Million workers
Biotechnology Firms
Health Maintenance Organizations (HMOs)

3. HEALTHCARE SECTOR |
OVERVIEW

4. HEALTHCARE SECTOR |
EXCHANGE TRADED FUNDS (ETFs)

5. Require at least one year of data to capture any seasonality trends
HEALTHCARE SECTOR |
ETF SELECTION
BTEC
JHMH
FXH
PSCH XH
XLV
RYH
FHLC
HCRF
VHT
PTH
IYH
No. of close price 79
332
2391
1718 22
4557
2525
824
183
3275
2591
4183
No. of good data points 57
308 8
109
Eliminated those that have too little data points to carry out an accurate analysis
Require at least one year of data to capture any seasonality trends

6. HEALTHCARE SECTOR | ETF SELECTION Final 7 ETFs Benchmarks FXH PSCH XLV
JHMH
FXH
PSCH
XLV
RYH
FHLC
VHT
PTH
IYH
Normally Distributed No
Random Walk
Yes
Final 7 ETFs
Benchmarks
FXH
PSCH
XLV
RYH
VHT
PTH
IYH
10 year
T-bill
S&P 500

7. HEALTHCARE SECTOR | 5-YEAR SHARPE RATIO
Average return earned in excess of the risk-free rate per unit of volatility.
The greater the value of the Sharpe ratio, the more attractive the ETF’s risk-adjusted return.
FXH
PSCH
XLV
RYH
VHT
PTH
IYH
Sharpe Ratio
0.37
1.14
0.93
1.23
0.89
0.11
-0.13

8. Reward-to-Volatility ratio
HEALTHCARE SECTOR |
3-YEAR TREYNOR MEASURE
FXH
PSCH
XLV
RYH
VHT
PTH
IYH
Treynor Measure
Reward-to-Volatility ratio
High ratio  Investor has generated high returns on each of the market risks he has taken
Difference from Sharpe Ratio  Treynor measure uses beta to measure volatility instead of using total risk (standard deviation)

9. Summary of Financial Ratios
HEALTHCARE SECTOR |
ETF RANKING
Summary of Financial Ratios
Ranking
1. FXH
2. RYH
3. VHT
4. PSCH
5. XLV
6. IYH
7. PTH
PSCH
FXH
XLV
RYH
VHT
IYH
PTH
Sharpe Ratio
0.37
1.14
0.93
1.23
0.89
0.11
-0.13
Treynor Measure

10. rpt – rft = α + β1MKT + β2SMB + β3HML
HEALTHCARE SECTOR |
FAMA FRENCH 3-FACTOR MODEL
Market factor: MKT
Size factor: SMB
Value factor: HML
rpt – rft = α + β1MKT + β2SMB + β3HML
Ranking
1. PSCH
2. FXH
3. RYH
4. PTH
5. VHT
6. IYH
7. XLV
FXH
IYH
PSCH
PTH
RYH
VHT
XLV
Alpha
-0.144
-0.592
-0.014
-0.306
-0.241
-0.468
-0.70 β1
0.764
0.726
0.897
0.894
0.774
0.824
0.752 β2
0.219
-0.081
0.791
0.450
0.041
-0.032
-0.137 β3
-0.286
-0.189
-0.453
-0.408
-0.265
-0.373
-0.249

11. Underestimation/ Overestimation?
HEALTHCARE SECTOR |
OLS RATINGS
FXH
IYH
PSCH
PTH
RYH
VHT
XLV
Last Price
$60.03
$148.64
$73.99
$50.43
$152.52
$131.06
$71.13
Slope
0.144
0.199
0.134
0.173
0.157
0.195
0.225
Y-Intercept
0.0004
0.0001
0.0005
0.0002
Variability
-1.56%
1.82%
2.43%
-2.41%
1.91%
1.56%
-3.10%
Underestimation/ Overestimation?
OVER
UNDER
Took regression slope (+ / -) and variability into account
Slope: Positive slope / negative slope?
Variability: Forecasted price vs. Actual Price (16th Feb | 2nd Mar | 16th Mar) Underestimate / overestimate the actual price?

12. HEALTHCARE SECTOR | OLS RATINGS
From these 3 graphs, we observed that using daily returns in our calculations seemed produce results that track the actual prices best.
Change slide
FXH
IYH
PSCH
PTH
RYH
VHT
XLV
Returns
2.18%
1.27%
1.69%
3.02%
0.99%
1.40%
2.81%
Rank 3 7 4 1 6 5 2
* Return based on April 14, 2017 forecast relative to March 30, 2017 forecast

13. PORTFOLIO OPTIMIZATION
HEALTHCARE SECTOR |
PORTFOLIO OPTIMIZATION
Variance – Covariance Matrix
FXH
PSCH
XLV
RYH
VHT
PTH
IYH
1.1E-04
9.7E-05
1.2E-04
1.3E-04
1.0E-04
9.9E-05
9.4E-05
9.3E-05
9.8E-05
9.2E-05
9.1E-05
1.5E-04
1.4E-04
1.8E-04
9.0E-05
9.6E-05
Constructed using shortest dataset as a constraint
Inclusive of OLS forecasts from 2nd Feb to 14th April

14. Portfolio Sharpe Ratio
HEALTHCARE SECTOR |
PORTFOLIO OPTIMIZATION
Equal Weights
Maximum Sharpe Ratio
Maximum Returns
Minimum Volatility
FXH
14% 0%
IYH
PSCH
27%
100%
PTH
RYH 6%
VHT
XLV
73%
94%
Weights
Portfolio Returns
0.06%
0.07%
Portfolio Volatility
1.03%
0.98%
1.24%
0.95%
Portfolio Sharpe Ratio
0.87
0.95
0.86
0.93
Change the objective to Maximize Sharpe ratio, Maximize Returns or Minimum Volatility respectively

15. MONTE CARLO SIMULATION
HEALTHCARE SECTOR |
MONTE CARLO SIMULATION
FXH
PSCH
XLV
RYH
VHT
PTH
IYH
16th March
63.43
79.85
73.10
160.67
135.78
52.12
152.29
16th March Actual
62.63
78.66
75.85
160.83
140.21
54.09
158.75
% Error
1.28%
1.51%
3.63%
0.10%
3.16%
3.64%
4.07%
31st March
64.81
82.06
73.85
163.91
137.51
52.73
153.81
14th April
65.84
83.96
74.46
166.54
139.01
53.26
154.79
Returns
1.56%
2.26%
0.82%
1.58%
1.08%
1.00%
0.63%
Skew
0.281
0.265
0.228
0.251
0.244
0.276
0.249
Ranking
1. PSCH
2. RYH
3. FXH
4. VHT
5. PTH
6. XLV
7. IYH

16. Ranking based on individual ranks for each of the techniques
HEALTHCARE SECTOR |
FINAL RANKING OF ETFs
OLS
Monte Carlo
Fama French
Financial Ratios
Total Points
Final Rank
FXH 3 2 1 9
PSCH 4 10
RYH 6 13
VHT 5 17
PTH 7
XLV 20
IYH 26
Ranking based on individual ranks for each of the techniques
Tie-break based on actual ETF performance

17. THANK YOU!