Beta index returns
|Investing in funds which follow high beta indexes is is intended for advanced investors only. It is not recommended for new investors, as it intentionally deviates from investing in the total market- a Bogleheads' philosophy approach to managing your portfolio. High beta index funds might only be appropriate for an investor's speculative "fun money" account.|
Beta index returns chronicles the historical annual returns of US and international high and low beta stocks as measured by stock indexes.
Index providers have recently introduced indexes designed to capture the return of stocks according to the stock's beta. [note 1] The index may attempt to track high beta stocks or low beta stocks.
A high beta index is designed for investors initiating a bullish strategy or making a directional bet on current markets. Powershares has introduced exchange traded funds tracking S&P high beta indexes.
Russell and S&P provide beta indexes covering both U.S. and international stock markets. S&P provides only high beta indexes, while Russell provides both high beta and low beta indexes.
The tables in the following sections provide index return, standard deviation, and growth of capital data. In addition, each beta index is compared to its parent index (for example, the S&P 500, Russell 1000).
Russell introduced its high beta and low beta indexes in 2011 with data backdated to 2002. S&P began its high beta indexes in 2011 with backdated data available going back to 1991 for the S&P index and 1998 for the international indexes.
S&P beta index returns
The S&P 500 High Beta Index measures the performance of the top 100 constituents in the S&P 500 that are most sensitive to changes in market returns. It is constructed by using trailing daily price changes over the previous year, and calculating the S&P 500 constituents’ betas. Constituents are then ranked in descending order of their betas.
A similar process is used in constructing the S&P BMI International Developed High Beta Index and the S&P BMI Emerging Markets High Beta Index. In both instances the top 200 high beta securities are selected to form each index.
The S&P high beta indexes are reconstituted quarterly.
The S&P high beta indexes do not precisely move in lock-step with market movements. S&P reports the following data from 1991-2012, showing the percentage of days that the high beta index tracked the overall market:
|S&P 500 High Beta||S&P BMI International Developed Market High Beta||S&P BMI Emerging Market High Beta|
The tables below include data for the S&P 500 high beta index and two international indexes: the developed market and emerging market indexes. The funds are also compared to the parent index from which are derived. Over the period measured, the S&P high beta indexes have been much more volatile than the parent index.
All of these indexes are tracked by Powershares etfs.
Russell-Axioma beta index returns
The Russell-Axioma low and high beta indexes are constructed by ranking constituent stocks by beta. Starting with the lowest beta stock, for the low beta index, and the highest beta stock, for the high beta index, each index adds stocks until the portfolio has a total capitalization of 35% of the target index. This target portfolio is the reference factor index. The indexes then select the following numbers of stocks, designed to "optimally track the returns of the target portfolio while managing turnover and neutralizing exposure to other factors": 
- The Russell-Axioma U.S. Large Cap Low Beta Index selects 200 stocks from the Russell 1000 index.
- The Russell-Axioma U.S. Large Cap High Beta selects 200 stocks from the Russell 1000 index.
- The Russell-Axioma U.S. Small Cap Low Beta Index selects 400 stocks from the Russell 2000 index.
- The Russell-Axioma U.S. Small Cap High Beta Index selects 400 stocks from the Russell 2000 index. [note 2]
- The Russell-Axioma Developed ex-U.S. Large Cap Low Beta Index selects 400 stocks from the Russell Developed ex-U.S. Large Cap Index.
- The Russell-Axioma Developed ex-U.S. Large Cap High Beta Index selects 400 stocks from the Russell Developed ex-U.S. Large Cap Index. [note 3]
The Russell-Axioma beta indexes are reconstituted monthly.
There are no current funds tracking the Russell indexes. [note 4]
The tables below provide returns, standard deviation, and growth of capital data for each of the Russell-Axioma beta indexes. The indexes are also compared to parent indexes.
|The Russell factsheet is currently not publishing returns for the Russell-Axioma Developed ex-US Large Cap High Beta Index.|
Investors in the U.S. can invest in exchange traded funds based on S&P high beta indexes. The table below provides a summary of available offerings.
|Fund||Sticker||Expense ratio||Holdings||Link||Morningstar link|
|Powershares S&P 500 High Beta ETF||SPHB||0.25||99||link||SPHB|
|Powershares S&P International Developed High Beta ETF||IDHB||0.35||201||link||IDHB|
|Powershares S&P Emerging Markets High Beta ETF||EEHB||0.45||200||link||EEHB|
- The parameter beta (β) is used to describe the relationship between the returns of a security or portfolio (an asset) and the returns of the market as a whole; it combines the correlation of the asset's returns and the market's returns with the relative volatility of those returns.
- Russell states: "The Russell-Axioma U.S. Large Cap High Beta/Low Beta and the Russell Axioma U.S. Small Cap High Beta/Low Beta Indexes deliver exposure to stocks with high/low beta as determined by a screening and ranking methodology applied to the output of the Axioma U.S. Equity Medium Horizon Fundamental Factor Risk model."
- Russell states: "The Russell-Axioma Developed ex-U.S. Large Cap High/Low Beta Indexes are designed to deliver exposure to stocks that have high/low predicted betas as determined by a screening and ranking methodology applied to the output of the Axioma AX-WW 2.1 World-Wide ex-USA Equity Factor Risk Model."
- Russell brought to market etfs tracking the firms volatility, beta, and momentum indexes in 2011, but subsequently closed them in October, 2012, due to low asset accumulation. See Russell To Close All But One Of Its ETFs, news article, August 19,2012.
- S&P 500 High Beta Index, from S&P Dow Jones Indices.
- S&P 500 High Beta Index, factsheet
- Source of returns:S&P 500 High Beta Index, download factsheet
- Source of returns: S&P BMI International Developed Market High Beta Index andS&P BMI Emerging Markets High Beta Index, select factsheets
- Russell-Axioma Long-Only Factor construction - methodology
- Source of returns: US Large Cap High Beta Index factsheet; US Large Cap Low Beta factsheet; US Small Cap High Beta factsheet; US Small Cap Low Beta factsheet]
- Source of returns: Developed ex US Large Cap factsheet
- Russell-Axioma U.S. Large Cap High Beta Index
- Russell-Axioma U.S. Large Cap Low Beta Index
- Russell-Axioma U.S. Small Cap High Beta Index
- Russell-Axioma U.S. Small Cap Low Beta Index
- Russell-Axioma Developed ex-U.S. Large Cap High Beta Index
- Russell-Axioma Developed ex-U.S. Large Cap Low Beta Index
- S&P 500 High Beta Index
- S&P BMI International Developed Market High Beta Index
- S&P BMI Emerging Markets High Beta Index
- Russell-Axioma Long-Only Factor construction - methodology
- S&P 500 High Beta Index, select methodology