European ETF Factor Exposures: Evidence from a Regression- and Holdings-Based Analysis

The Journal of Index Investing Summer 2019, 10 (1) 37-50

Posted: 1 Aug 2019

See all articles by Philipp Dirkx

Philipp Dirkx

Zeppelin University; ODDO BHF Group

Date Written: June 30, 2019

Abstract

The article analyzes factor exposures of European equity exchange-traded funds (ETFs) according to 10-year regressions and a holdings-based analysis. While smart beta ETFs target certain factors explicitly, they and conventional market-capitalization-weighted ETFs (conventional ETFs) both can carry implicit exposures, too. The analysis shows that especially various sector ETFs carry strong regression-based factor exposures, which are only partially mirrored from a holdings-based view. Collectively, the conventional and smart beta ETFs show various significant factor loadings, which are mostly backed by the holdings-based analysis. Translating the flows in smart beta ETFs into a form of factor timing of market participants, the asset-weighted smart beta aggregate outperformed the market on an absolute and risk-adjusted basis.

Keywords: Factor Investing, Smart Beta, ETF Flows, Investor Return Gap

JEL Classification: G10, G12

Suggested Citation

Dirkx, Philipp, European ETF Factor Exposures: Evidence from a Regression- and Holdings-Based Analysis (June 30, 2019). The Journal of Index Investing Summer 2019, 10 (1) 37-50, Available at SSRN: https://ssrn.com/abstract=3428434

Philipp Dirkx (Contact Author)

Zeppelin University ( email )

Am Seemooser Horn 20
Friedrichshafen, Lake Constance 88045
Germany

ODDO BHF Group ( email )

Boulevard de la Madeleine 12
Paris, 75440
France

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