Hedged versus Non-Hedged S&P 500 Index

VanderPal, Geoffrey. (2006). S&P 500 Index investing versus hedged S&P 500 Index investing (Diss, Nova Southeastern University, 2006) Dissertation Abstracts International, 55. (UMI No. AAT 3205549).

55 Pages Posted: 16 Oct 2016

Date Written: February 1, 2006

Abstract

Published as a dissertation in 2006 for Nova Southeastern University.

The purpose of the study will be to determine whether two methods of investment hedging that protect principal invested can provide a better risk-adjusted return than a benchmark such as the Standard and Poor’s 500 index (S&P 500). The proposed dissertation study will focus on the risk adjusted return of the S&P 500 index versus two methods of preserving the principal that invest into the S&P 500 index to reduce volatility. Since index investing is widely used by many investors and institutions, the study will focus on this type of investment in both a hedged and non-hedged measurement of risk-adjusted performance using the Sharpe and Sortino ratios to determine which methodology performs best.

The study will analyze a hedging technique known as annual reset point-to-point, where the principal value is invested in secure income investments and the dividends or interest income is invested into European Call Index Options based upon the S&P 500 index on an annual basis (VanderPal, 2004). The dissertation will also examine a hedge technique very similar to the annual reset point-to-point method based on a monthly basis that is also known as a monthly reset point-to-point. The results were significant and indicated the hedged method, known as the VanderPal Method (TM) is superior in performance and much lower risk metrics over 10 year period between 1995-2004.

Keywords: Index Options, Equity Options, Index Investing, Hedged Investments, Hedging, S&P 500, Portfolio Insurance, Index Hedging

Suggested Citation

VanderPal, Geoffrey, Hedged versus Non-Hedged S&P 500 Index (February 1, 2006). VanderPal, Geoffrey. (2006). S&P 500 Index investing versus hedged S&P 500 Index investing (Diss, Nova Southeastern University, 2006) Dissertation Abstracts International, 55. (UMI No. AAT 3205549).. Available at SSRN: https://ssrn.com/abstract=2851136 or http://dx.doi.org/10.2139/ssrn.2851136

Geoffrey VanderPal (Contact Author)

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