Compendium of Live ETF Factor/Niche Premium Capture Tests

Some exchange-traded funds (ETF) focus on capturing potentially attractive factor premiums or thematic niches. Their histories offer a way to test these concepts live. We have conducted many such tests, listed here to offer a global view.

1. “U.S. Equity Premium?” – evidence from simple tests on about 21 years of data suggests that stock market leadership shifts between the U.S. and other developed markets over time, but the U.S. may be better overall.
2. “Tech Equity Premium?” – evidence from simple tests on 24 years of data suggests long boom, short bust for a tech/innovation-concentrated portfolio. It does not support belief in risk-adjusted outperformance.
3. “Measuring the Size Effect with Capitalization-based ETFs” – evidence from simple tests of capitalization-based ETFs with nearly 22 years of data offers little support for belief in a long-term, reliably exploitable size effect among U.S. stocks.
4. “Do Equal Weight ETFs Beat Cap Weight Counterparts?” – evidence from simple tests on some equal-weight U.S. equity ETFs offers little support for belief that equal weighting substantially and reliably beats capitalization weighting on a net basis.
5. “Measuring the Value Premium with Value and Growth ETFs” – evidence from simple tests with 21.6 years of available data does not support belief that investors reliably capture a value premium via popular value-growth ETFs.
6. “Are Equity Momentum ETFs Working?” – available evidence on attractiveness of momentum-oriented U.S. stock and sector ETFs is less than compelling.
7. “Are Stock Quality ETFs Working?” – available evidence offers little support for belief that quality ETFs reliably beat respective benchmarks.
8. “Are Low Volatility Stock ETFs Working?” – available evidence on attractiveness of low volatility stock ETFs is mixed, with recent data undermining belief in reliability of low volatility outperformance.
9. “Are Equity Multifactor ETFs Working?” – available evidence offers very little support for belief that equity multifactor ETFs beat their benchmarks, or that they offer material diversification with comparable performance.
10. “Are Hedge Fund ETFs Working?” – evidence on attractiveness of hedge fund-oriented ETFs is mostly negative.
11. “Are Managed Futures ETFs Working?” – available evidence on attractiveness of managed futures ETFs in aggregate (but with recent short-sample exceptions) suggests that any benefits from diversification of equities and fixed income are unlikely to compensate for poor absolute returns.
12. “Best Safe Haven ETF?” – evidence from simple tests over available and common sample periods suggests that silver, gold, longer-term U.S. Treasuries and investment grade corporate bonds are safe havens, while crude oil is clearly not.
13. “Do High-dividend Stock ETFs Beat the Market?” – evidence from data for high-dividend U.S. stock ETFs does not support belief that high-dividend stocks reliably outperform the broad U.S. stock market.
14. “Are ESG ETFs Attractive?” – available evidence suggests that ESG ETFs do not perform much differently from selected benchmarks.
15. “How Are Renewable Energy ETFs Doing?” – available evidence on attractiveness of renewable energy ETFs is adverse overall, but with bursts of market outperformance perhaps due to novelty.
16. “How Are Robotics-AI ETFs Doing?” – available evidence is that robotics-AI ETFs are less attractive than the broader technology exposure offered by QQQ.
17. “How Are AI-powered ETFs Doing?” – available evidence does not support belief that ETFs using AI to select and weight assets are particularly attractive.
18. “Are iShares Core Allocation ETFs Attractive?” – available evidence regarding attractiveness of iShares Core Asset Allocation ETFs is mixed to negative.
19. “Are Target Retirement Date Funds Attractive?” – evidence offers little support for belief that target retirement date mutual funds are preferable to simple stocks-bonds diversification.
20. “How Are TIPS ETFs Doing?” – available evidence on attractiveness of TIPS ETFs is mostly favorable after the recent inflation burst, with shorter duration funds offering more reliable inflation protection.
21. “Are Equity Index Covered Call ETFs Working?” – available evidence on attractiveness of equity index covered call ETFs as either substitutes for or diversifiers of underlying stock indexes is generally adverse.
22. “Are Equity Put-Write ETFs Working?” – available evidence on attractiveness of equity put-write ETFs is adverse.
23. “Are IPO ETFs Working?” – available evidence on attractiveness of IPO ETFs is mixed, requiring very high risk tolerance of interested investors.
24. “Are Preferred Stock ETFs Working?” – available evidence on attractiveness of preferred stock ETFs relative to a 60-40 stocks-bonds portfolio is largely negative.
25. “Do Convertible Bond ETFs Attractively Meld Stocks and Bonds?” – available evidence suggests that convertible bond ETFs sometimes outperform and sometimes underperform a conventional 60-40 stocks-bonds portfolio.
26. “Do ETFs Following Gurus/Insiders Work?” – available evidence on attractiveness of guru/insider-following stock ETFs is mostly adverse.
27. “Congressional Trade Tracking ETFs” – limited available evidence suggests that investors should choose a fund mimicking holdings of Democrat rather than Republican members of Congress.
28. “The Long and Short of Jim” – available evidence does not support belief that funds based on Jim Cramer’s stock/market recommendations reliably produce attractive short-term returns.
29. “Live Test of the Stock Market Overnight Move Effect” – early evidence does not support belief in exploitability of the overnight move effect.

The upshot of the above items is that academic factor research and thematic speculations rarely translate to outperformance when implemented with ETFs.

A global caution is that the period since 2009 is strong for broad equity indexes, driven by a few large-capitalization firms. This trend may not persist.