Why we focus on index ETF?

1. Inflation

We believe that world economic growth is unstoppable. 20 years later, the price of Coca-Cola will be higher than the present.

Deflation is harmful, but a suitable inflation rate can stimulate the economy. Central banks will remain inflation rate% positive when deflation is likely to happen (economic recession).

2. Diversification

A good portfolio construction can reduce overfitting and portfolio volatility so that the Sharpe ratio can be increased.

3. Higher market liquidity

Higher liquidity means lower volatility. It helps us to execute a better price.

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Alternative Sector Classification Methods

Abstract This paper offers two alternative sector classification methods in order to classify companies more accurately. Introduction During the early 1900s, various departments of the US government initiated research and studies on the various industries and their different functions. Due to the lack of set standards, each department ended up using its own methodology. Consolidating information across multiple sources became a challenge. The Standard Industrial Classification (SIC) was hence proposed as a uniform classification system, aimed to represent major industries, sub-class and specific function/product, and was formally adopted in 1937. However, SIC was facing a challenge because of the change in the economic environment. After that, the Global Industry Classification System (GICS) was launched by Standard & Poor's (S&P) and Morgan Stanley (MSCI) in August 1999. The standard provides a comprehensive, globally consistent definition of economic sectors a...

1929 Market Crash Cause

Many people believe in the reason why the market value of all share listed in NYSE fell by 30% is that there was an economic bubble and the stock market is irrational. However, is that the truth? We are going to show you three different approaches to the 1929 market crash. Remember that correlation is not causation. These are just references. Approaches: 1. There was no economic bubble before the 1929 market crash. Irving Fisher, a famous US economist said: “prices of stocks are low.” Fisher based his projection on strong earnings reports, fewer industrial disputes, and evidence of high investment in R&D and other intangible capital. 2. There was insider trading. In the months prior to the stock market crash of 1929, the price of a seat on the NYSE was abnormally low. Rising stock prices and volume should have driven up seat prices during the boom of 1929; instead, there were negative cumulative abnormal returns to seats of approximately 20% in the months before the market crash. A...

Chicago Fed National Activity Index (CFNAI) can predict US economic uncertainty

What is the Chicago Fed National Activity Index (CFNAI)? Many people use unemployment rate% to measure the US economy. The correlation between unemployment rate% and GDP growth is always negative. However, many people now realize that it is wrong. Unemployment rate% has not been a good predictor since 2008. There was a precaution telling you that the unemployment rate% cannot accurately measure the economy in the past. Using CFNAI to measure the economy is better than using the unemployment rate%. The CFNAI is a weighted average of 85 existing monthly indicators of national economic activity. It is constructed to have an average value of zero and a standard deviation of one. Since economic activity tends toward trend growth rate over time, a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend. The 85 economic indicators that are included in the CFNAI are drawn from four broad categories of data: production and income; ...

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