Can Simple Strategies Beat S&P 500?

Abstract

Buy and hold strategies typically outperform active management of portfolios. Few active strategies though outperform passive strategies. This study is an attempt to back-test some simple active strategies that most investors can replicate with little effort. Criteria for these strategies include size and/or value strategies applied within the S&P 500 index. These strategies consistently outperform the S&P 500 index total return over a long period. Size, value, and a combination of size, and value generated positive excess returns. This study corroborates the emergence of smart beta strategies and factor-based investing that is gaining traction in financial markets.