Alternative Out-of-sample Money Anxiety Index Tests

“Using the Money Anxiety Index for ETF Selection” examines whether the proprietary Money Anxiety Index (MAI) can select long and short portfolios of ETFs that beat the S&P 500 Index (ignoring dividends). Test outputs are 5-year, 3-year and 1-year cumulative returns. A deeper look at performance may be helpful. We extend the test period by eight months and focus on the full period. We consider SPDR S&P 500 ETF Trust (SPY) with dividends as a benchmark. We also consider Invesco QQQ Trust (QQQ), which has much affinity with the MAI-selected ETFs, as a benchmark. We compute monthly return statistics, along with compound annual growth rates (CAGR) and maximum drawdowns (MaxDD). Using beginning-of-month, dividend-adjusted prices for the 10 ETFs in the MAI-generated portfolios and the two benchmarks from the beginning of May 2018 through the beginning of March 2024, we find that: (more…)