The Capital Asset Pricing model (CAPM) is the most widely used equity valuation model in both the United States of America (U.S.) and South Africa, thus its importance in corporate finance cannot be underestimated. The largest criticism of the CAPM lies in the difficulties with estimating its parameters and in particular the return on the market parameter. Roll (1977) believed that it is impossible to estimate the market portfolio let alone find a good proxy for it. The common trend amongst practitioners is to use a broad based stock index such as the S&P 500 or in South Africa‟s case the All Share Index (ALSI) as a proxy for the market portfolio. However these methods are questionable, as the market portfolio theoretically contains all risky assets held in proportion to their market value, and stock indices ignore large asset classes such as bonds. Furthermore, using a broad based stock index in the South African context ignores South African specific problems such as the supposed segregation of the market to the Resource and Financial and Industrial sectors. Therefore the purpose of this study was to determine whether simply using the broad based stock index, the ALSI, as a proxy for the market portfolio would suffice or whether the inclusion of debt instruments and the acknowledgement of the segregation on the JSE would enhance the proxy‟s performances. First a set of theoretical requirements that a proxy must satisfy to be considered a suitable proxy for the market portfolio were derived. Then a review of literature on the matter was undertaken, which showed that studies in both the U.S. and South Africa had had mixed results. Next, the various proxies were formed, and tested using the two-pass regression method. The two-pass regressions that were run with the model comprising solely of the ALSI as a proxy, produced a negative sloping SML. This result suggested an inverse relationship between risk and return, which is contradictory to the theory set out in chapters two and three. Thus robustness tests were performed on the model, but none solved the problem. Next the proposed multifactor models were tested to see if they would enhance the results of the first model. Although the results improved slightly, they too did not solve the problem. Thus, in conclusion it was found that incorporating a bond index into the proxy for the market portfolio did not significantly enhance the use of the CAPM in South Africa. / Thesis (M.Com.)-University of KwaZulu-Natal, Pietermaritzburg, 2011.

In recent years, the financial service industry demonstrated substantial growth of Exchange Traded Funds (ETFs). Apart from offering access to new and more specific investment opportunities, many ETFs enter direct competition with conventional, already existing Mutual Index Funds. With 22,1% growth of assets over the past 5 years, the European market by now accounts for 19% of the global ETF market, while at the same time we observe a decline of cash flows to Mutual Index Funds. Given the recent development, index investors are likely to face a choice between ETFs and Mutual Index Funds offering the same service. The purpose of this study is to analyze those two similar investment instruments towards the quality of achieving their objective, which is to deliver a performance as close as possible to the respective benchmarks'. The analysis will be performed for the European market, i.e. we include only Index Funds that track European indices. This study is guided by objectivism and positivism as ontological and epistemological positions. We conduct a deductive research by reviewing and testing previous findings through the formulation of hypotheses that serve our purpose. For our analysis we gather quantitative data in the form of daily prices for 21 ETFs and 22 Mutual Index Funds, tracking 9 European indices. We further use a time frame of 7 years (2006-2012), which we analyze as a whole as well as divided into sub-periods as determined by different states of the European market. As a basis for the analysis we calculate return differences and different measures of tracking risk. Our results show that on average ETFs as well as Mutual Index Funds sufficiently replicate index performance with approximately the same level of tracking risk for both instruments. Furthermore, we see no significant impact of expected returns or index volatility on return difference. However, through examination of fees and tracking errors during recent economic turmoils, we show that ETFs first bear lower directly attributed costs and second are less affected by down markets than Mutual Funds.

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Exchange traded funds (ETFs) are a relatively recent financial innovation receiving much attention from investors and media due to its low administrative costs. Literature related to ETF performance presents no sizeable records as a result of its brief history.This study contributes to the literature on ETF performance by comparing ETFs to their respective tracking indices as well as to comparable passive unit trusts (PUTs) and active unit trusts (AUTs) after administrative costs. Data used involved ETFs that are derived from securities listed on the Johannesburg Stock Exchange (JSE) that track FTSE/JSE indices. PUTs and AUTs were selected on the basis that they use the same FTSE/JSE indices, as the ETFs, as a benchmark.The results indicate that ETFs have a slightly lower tracking error than PUTs due to lower administrative costs. On average, ETFs and PUTs present statistically insignificant net return differences and it can be inferred that they have very similar return records. Furthermore, ETFs and AUTs, on average, also present statistically insignificant net return differences and it can be inferred that they have very similar return records. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

Thesis (MBA)--Stellenbosch University, 2001. / ENGLISH ABSTRACT: Many tracker funds exist in the South African market in which investors can invest their money. Growing in:popularity is the index funds that, instead of investing in individual shares invest into funds that track and guarantee returns related to specific indices. One such fund is the All Share Index 40 (ALSI40) Tracker Fund. The index is equity based to reflect the performance of the ordinary South African share market. Companies selected for inclusion in the ALSI40 Index are generally larger companies of sound financial standing having widely traded and marketable securities. As the ALSI40 is therefore a reflection of the total market as a whole, investing into such a Tracker Fund would only gain average returns over the long run. A modeled developed through using a twenty-day moving average to signal buy and sell periods, coupled with individual share gradients likened to future share growth potential is evaluated to determine if such a model would gain returns above the Tracker Fund and therefore gain returns above the ALSSI40 Index. The study project is wholly based on technical analysis, specific to the shares that constitute the ALSI40 Index. Through the selection of these shares fundamental analysis is taken care of and emphasis is placed on a technical trading technique developed. The technique is based on a two-stage model. Firstly, switch points are determined that indicate buy and sell signals through applying a 20-day moving average to the daily closing price of the selected shares. When the moving average is tracking below the closing price a buy signal is generated, and when the gradient of the moving average turns negative a sell signal is generated. Using these 'switch points', the second stage of the model is entered into through the allocation of weights to individual shares that conform to the buy selection criteria. The weights are determined using the gradient of the linear regression analysis equation. The gradient is synonymous with the growth potential of the share at the time a switching takes place. Through the use of the above model it was found that returns well above the holding period return of the ALSI40 Index are achievable. Evaluation of the model on a calendar year basis yielded a 113% over and above the return yielded by the ALSI40 Index for 1999. Similarly, positive returns were yielded for the 2000 calendar year and thus entrenching the trading technique as being successful. The major downside to the model is the number of switches dictated through strict adherence to the developed model. For example, 110 switches were necessary during 1999 to achieve the 113% over and above yield. Assuming switching fees of 1% per switch, margins that beat the holding period return of the ALSI40 would rapidly be eroded away. Although successful in achieving the aim of beating returns of the ALSI40, the model and computer code developed is robust and primitive in form. Numerous options exist to optimise the model, and thereby the potential to generate even greater returns. Optimisation would include a better 'gradient' function and procedure to reduce switching costs. The switching technique used is the most efficient obtainable from a single moving average. / AFRIKAANSE OPSOMMING: Daar bestaan vele 'tracker" fondse in Suid-Afrika waarin beleggers hulle geld kan belê. Die mees gewilde van hierdie fondse is die indeksfondse wat groei verwant aan spesifieke indekse waarborg, en dus direkte belegging in individuele aandele vervang. Een so 'n indeksfonds is die "All Share Index 40 (ALSI40) Indeks "Tracker" Fonds. Hierdie indeks is gebaseer op aandeelhouersbelang (gewone aandele) om die opbrengs van die gewone Suid-Afrikaanse aandelemark te reflekteer. Die gekose maatskappye vir insluiting in die ALSI40 indeks is gewoonlik die groter maatskappye met 'n gesonde finansiële status, met verhandelbare en verkoopbare sekuriteite. Aangesien die ALSI40 dus 'n weerspieëling is van die totale Suid-Afrikaanse aandelemark as 'n geheel, sal belegging in 'n 'tracker" fonds slegs gemiddelde groei oor die langtermyn lewer. 'n Model ontwikkel deur middel van die gebruik van 'n 20 dag bewegende gemiddelde om koop en verkoop tydstippe aan te dui, gekoppel aan individuele aandeelhellings te einde toekomstige aandeelgroei-potensiaalaan te toon, word beoordeel om te bepaal of so 'n model groei bo the 'tracker" fonds sal lewer, en dus ook groei bo die ALSI40 Indeks. The studieprojek is in geheel gebaseer op tegniese analise, met spesifieke verwysing na die aandele wat in die ALSI40 Indeks bestaan. Deur die seleksie van hierdie aandele is die fundamentele analise by implikasie reeds aangespreek en word die ontwikkelde tegniese verhandelingstegniek beklemtoon. Die tegniek is gebaseer op 'n twee-fase model. Eerstens, herbelegginspunte word bepaal, welke punte koop- en verkoopseine aandui deur middel van die toepassing van 'n 20 dag bewegende gemiddelde op die daaglikse sluitingsprys van die aandele. Wanneer die bewegende gemiddelde benede die sluitingsprys beweeg, word 'n koopsein genereer, en wanneer die helling van die bewegende gemiddelde negatief draai, word 'n verkoopsein genereer. Deur hierdie punte te gebruik, word die tweede fase van die model binnegetree deur die allokasie van gewigte aan die individuele aandele wat voldoen aan die koop-seleksie kriteria. Die gewigte word bepaal deur die helling van die lineêre regressie vergelyking. Die helling is sinoniem met die groeipotensiaal van die aandeel soos op die tydstip wat die herbelegging plaasvind. Deur gebreuik te maak van die bogenoemde model, is dit bevind dat die groei bo die hou periode van die ALS140 bereik kan word. Beoordeling van die model gebaseer op 'n kalenderjaar, het groei van 113% bo die 1999 groei van die ALS140 indeks gelewer. Soortgelyk is positiewe groei vir die 2000 kalenderjaar gelewer, wat derhalwe die verhandelingstegniek as suksesvol bevestig. Die grootste teenkant van die model is die aantal herbeleggings wat genereer word deur streng toepassing van die model. Byvoorbeeld, 110 herbeleggings was nodig gedurende 1999 om die 113% groei bo die indeks te bereik. Met die aanname dat herbeleggingskostes van 1% per herbelegging gehef word, word marges wat deur die houperiode-opbrengs van die ALS140 bereik kan word, vinnig uitgeroei. Alhoewel die model suksesvol is in die bereiking van die doel om die ALS140 opbrengs te verbeter, is die model en die rekenaarprogram wat ontwikkel is kragtig en primitief. 'n Groot aantal opsies is beskikbaar om die model te verbeter, en derhalwe die potensiaal om selfs hoër groei te genereer. Sulke opsies sal 'n verbeterde helling-funksie insluit asook 'n proses om herbeleggingskostes te verminder. Die herbeleggingstegniek wat gebruik is, is die effektiefste tegniek wat beskikbaar is vir 'n enkele bewegende gemiddelde.

Background: Since 1998 Sweden has individual accounts as a part of both public and occupational schemes (Sundén 2006). Yearly, 2,5% of the pensionable income is set aside to the premium pension (The Swedish Pension Agency 2021) Individuals are able to choose how the premiums should be paid in the system and in what way the money should be invested, either by choosing from the fund market or by refraining from making an active choice and instead let the Swedish pension agency management their money in the passive alternative called AP7 Såfa. The passive alternative AP7 Såfa is a portfolio which adapts to the age of the investor and is built to fit a long-term pension investment.  Purpose: This study will focus on evaluating if the passive alternative AP7 Såfa has an excess risk-adjusted return compared to given portfolios in the premium pension selection system, or if the investor would benefit from managing the portfolio more actively. The study will also search for benefits using the Treynor-Black model to check the optimal allocation between this actively managed portfolio versus the passive alternative AP7 Såfa.  Conclusion: This thesis has shown that there might be superior strategies rather than the index fund to find risk-adjusted excess return in the premium pension system. However, those strategies require professional analysts in order to forecast securities. For households choosing between active management themselves or the passive index fund AP7 Såfa, the most beneficial investment is to be passive and to not actively manage the portfolio. The optimum strategy is found to be the Treynor-Black model with a combined portfolio of the index fund and the active portfolio.

Recently, the debate on passive versus active fund management has been a major focus on the Swedish capital market. Passive management is gaining more and more market shares. However, theories and previous research show that Smart Beta strategies outperform their passive benchmark index. The Smart Beta strategy is described as a hybrid between active and passive fund management, where it takes advantage of the low management cost of passive fund management and active fund management’s ability to select. This study presents three new Smart Beta strategies based on the key ratios ROA, profit margin and gross margin. The purpose of the study is to investigate whether any of the three Smart Beta portfolios can perform better than the Swedish market based on OMXS30 from a risk-adjusted perspective. Previous studies have shown that Smart Beta portfolios outperform their benchmark index. However, this study's contributing key figures show no excess return for the investigated period on the Swedish stock market.

Under de senaste åren har investeringsintresset ökat kraftigt, och i synnerhet intresset för att investera i fonder. Detta medför en problematik då valet att investera i aktivt eller passivt förvaltade fonder inte är självklart. Tidigare studier pekar åt olika håll när det kommer till detta dilemma. Syftet med denna studie är att undersöka vilken förvaltningsstrategi som har gett mest avkastning i förhållande till den tagna risken och avgiften. Då marknaden under de senaste åren har varit volatil ger detta mer relevans till studiens syfte. Studiens valda tidsperiod sträcker sig mellan 2017-04-21 och 2022-04-21. För att vidare undersöka om det lönar sig att investera i aktivt förvaltade fonder med högre avgift, formuleras två hypoteser. Studien undersöker ett urval på totalt 110 aktivt och passivt förvaltade svenska aktiefonder som enbart är exponerade mot svenska bolag.           Studiens resultat av de två förvaltningsstrategiernas genomsnittliga prestations- och riskmått skiljer sig inte avsevärt gentemot varandra. Studiens resultat pekar på att indexfonderna har presterat marginellt bättre än de aktivt förvaltade fonderna och i genomsnitt har dessa gett högst avkastning till lägst tagen risk. Studiens båda hypoteser förkastades då samtliga korrelationskoefficienter påvisade svaga icke-samband samt att de inte var signifikanta på en 5% signifikansnivå. Sammanfattningsvis medför en högre avgift nödvändigtvis inte en högre avkastning eller riskjusterad avkastning. / In the recent years, the interest in investing on the stock market has increased sharply, and in particular the interest to invest in funds. This entails a problem as the choice to invest in actively or passively managed funds is not self-evident. Previous studies point in different directions when it comes to this dilemma. The purpose of this study is to examine which management strategy has given the most return in relation to the risk and the fee. As the market in recent years has been volatile, this gives the purpose of why this study is relevant. This study's investigates the market from 2017-04-21 and 2022-04-21. To further investigate whether it is profitable to invest in actively managed funds with a higher fee compared to index funds, two hypotheses are formulated. The study investigates a sample of 110 actively and passive managed Swedish equity funds that are only exposed to Swedish companies.  The conclusion of the performance and risk measures of the two management strategies do not differ significantly from each other. Marginally the result of this study indicates that the index funds have an average higher return at the lowest risk. Both hypotheses of this study were rejected when all correlation coefficients showed weak non-correlations and that they were not significant at a 5% significance level. In summary, a higher fee does not necessarily lead to a higher return or a higher risk-adjusted return.

[pt] O objetivo deste trabalho é analisar a eficiência na precificação de três dos Exchange-Traded Funds brasileiros mais líquidos (BOVA11, SMAL11 e PIBB11), buscando determinar se eles seguem com bastante proximidade os índices que procuram replicar, comparando com o que é observado na literatura internacional no que diz respeito ao desempenho de ETFs estrangeiros. Inicialmente verificou-se a estratégia de replicação adotada, bem como a qualidade dessa replicação a partir da avaliação do tracking error observado nesses fundos. Em seguida buscou-se avaliar se há algum desvio na precificação entre o preço de negociação e o valor patrimonial líquido (NAV) do respectivo ETF, ou seja, se o ativo está sendo negociado, na média, com prêmio ou desconto. Por fim, foi analisada a persistência dos prêmios ou descontos encontrados, isto é, quanto tempo leva até o preço de mercado e o NAV voltarem ao equilíbrio. Os resultados encontrados mostram que os fundos BOVA11 e PIBB11 adotam uma estratégia de full replication, enquanto o SMAL11 apresenta uma estratégia de otimização. O tracking error encontrado está em linha com aqueles observados em ETFs europeus e os três fundos estudados são negociados, na média, com desconto. Finalmente, tanto BOVA11 e PIBB11 levam sete dias para voltarem ao equilíbrio, bastante acima da média observada na literatura internacional, enquanto o SMAL11 leva apenas dois dias para isso, o que é inesperado já que é o fundo menos líquido dentre os analisados. Os resultados indicam que as ferramentas de arbitragem não estão sendo utilizadas de maneira eficiente. / [en] The objective of this study is to analyze the pricing efficiency of three of the most liquid brazilian Exchange-Traded Funds (BOVA11, SMAL11 and PIBB11) and determine if they follow closely the indexes they try to replicate, comparing with the international literature regarding the foreign ETFs performance. Firstly, this study verifies which strategy is adopted by each fund, as well as the quality of this replication by evaluating the tracking error observed in these funds. Then it is analyzed if there is any deviation between the trading price and the net asset value (NAV) of the respective ETF, that is, if the security is being traded, on average, with a premium or discount. Finally, it is evaluated the persistence of those premiums and discounts found, that is, how much time it takes until the trading price and the NAV go back to equilibrium. The results showed that both BOVA11 and PIBB11 adopt a full replication strategy, while SMAL11 presents an optimization strategy. The tracking error found is in line with those observed in European ETFs and the three funds are traded, on average, with a discount. Finally, both BOVA11 and PIBB11 take seven days to go back to equilibrium, while SMAL11 only takes two days, an unexpected result as this is the least liquid fund of the three that are part of this study. Therefore, the arbitrage tools are not being used efficiently.