Was 2016 the Year of the Monkey?

Abstract

According to the Chinese calendar 2016 was the year of the Monkey. In this paper, using a common set of 500 US stocks, we analyse the performance of 1 billion randomly generated stock indices (as if chosen by a monkey) to both a market capitalization-weighted index and several popular smart beta indices. We find that 2016 was indeed a good year for monkeys. In the interests of animal welfare we have since released our monkeys back in to the wild for a well-earned rest and some energy replenishing bananas. It is now the Chinese year of the Rooster. Perhaps the big question is: who will be crowing by the end 2017, monkeys or market cap proponents?

Keywords: Market capitalisation-weighted indices, Alternative equity indices, Smart Beta

JEL Classification: G10, G11, G14, G23