Does fundamental indexation lead to better risk-adjusted returns? New evidence from Australian Securities Exchange
Basu, Anup K. & Forbes, Brigette (2014) Does fundamental indexation lead to better risk-adjusted returns? New evidence from Australian Securities Exchange. Accounting And Finance, 54(3), pp. 699-728.
We investigate the claims of superiority of fundamental indexation strategy over capitalisation-weighted indexation by using data for Australian Securities Exchange (ASX) listed stocks. Whilst our results are in line with the outperformance observed in other geographical markets, we find that the excess returns from fundamental indexation in Australian market are much higher. On a rolling 5-year basis, the fundamental index always outperforms the capitalisation-weighted index. Our results suggest that superior performance of fundamental indexation could not be entirely attributed to value, size, or momentum effects. The outperformance persists even after adjusting for slightly higher transaction costs related to turnover.
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|Item Type:||Journal Article|
|Keywords:||Fundamental Index, Capitalisation Index, Passive Management, Valuation|
|Subjects:||Australian and New Zealand Standard Research Classification > ECONOMICS (140000)|
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
|Copyright Owner:||Copyright 2013 The Authors|
|Copyright Statement:||This is the accepted version of the following article: Basu, A. K., Forbes, B. (2014), Does fundamental indexation lead to better risk-adjusted returns? New evidence from Australian Securities Exchange. Accounting & Finance, 54: 699–728. doi: 10.1111/acfi.12016, which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/acfi.12016/abstract|
|Deposited On:||24 Feb 2013 22:24|
|Last Modified:||10 Oct 2016 18:53|
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