James DiLellio, PhD, MBA, Associate Professor of Decision Sciences
Darrol J. Stanley, DBA, Professor of Finance and Accounting
ETF Trading Strategies to Enhance Client Wealth Maximization. Financial Services Review, 20, p. 145-163, (2011).
Abstract
This study examines the performance of pragmatic ETF-only investment strategies published either in an investment newsletter, blog, or are otherwise available through investment advisories. Our objective is to determine if ETF-only strategies can outperform either the S&P 500 or more representative benchmarks on an absolute and/or risk-adjusted basis. We surveyed a number of strategies and analyzed a subset that supported a five-year price history, including both trading commissions and bid-ask spread costs. Our findings show that while a majority of strategies beat the S&P 500 and a representative benchmark, weak statistical outperformance persisted in a smaller fraction of the sample.
James DiLellio, PhD, MBA, Associate Professor of Decision Sciences
Is There a Free Lunch in Commission Free ETFs?. Graziadio Business Review, 19, (2), (2016), Philip M. Goldfeder.
Abstract
Competition amongst discount brokers for investment dollars continues, and in recent years has reached a point where many offer commission-free exchange-traded funds (ETFs). Since minimizing costs from increased market efficiency is always of interest, commission-free ETFs may seem an obvious choice over other ETFs that carry a nominal commission. Unfortunately, other costs can play a role that can marginalize the perceived advantage of the commission-free ETFs, and in some cases, warrant the selection of an ETF that carries a commission. This study investigates how holding and transaction costs can affect the cost calculus of commission-free ETFs. The results provide a clear recommendation on how to minimize costs using commission free ETFs.
James DiLellio, PhD, MBA, Associate Professor of Decision Sciences
Rick Hesse, DSc, Professor of Decision Sciences
Darrol J. Stanley, DBA, Professor of Finance and Accounting
Portfolio Performance with inverse and leveraged ETFs. Financial Services Review, 23(2), 123-149, (2014).
Abstract
Turbulent economic and financial times require investors and financial planners to investigate new ways to handle the goal of wealth maximization. This article investigates passive investment strategies that use inverse or leveraged equity exchanged-traded funds (ETFs) in their asset allocation, and quantifies the long-term impact on portfolio performance for the purpose of improving the risk-reward tradeoff. Monte Carlo simulations are used, drawing samples from distributions created by two distinct time periods of historical daily market returns. The findings suggest that, whereas these products are generally not recommended within long-term passive investment strategies, potential diversification benefits exist, dependent on the behavior of equity and debt markets. These findings could materially alter long-term passive portfolio construction methods currently in use by financial planners and individual investors seeking potential diversification benefits using ETFs.
James DiLellio, PhD, MBA, Associate Professor of Decision Sciences
What to do when Traditional Diversification Strategies Fail – Revisited.Graziadio Business Review, 13(4), (2010).
Abstract
Reduced costs of trading commissions are a welcome new benefit of using ETFs as portfolio building blocks, but the cost of the bid-ask spread can be significant if low-volume ETFs are mixed into a diversified portfolio.
