A comprehensive study on smart beta strategies in the A-share market

Abstract

In this article, we explore how smart beta strategies are applied in the Chinese A-share market. Specifically, we empirically examine several popular smart beta strategies, including mean-variance optimization, minimum-variance portfolio, equal weighting, risk parity strategy, and fundamental indexation, and we do so using the Shanghai Stock Exchange (SSE) 50 index and SSE sector indices as our comparison benchmarks. We find that all smart beta strategies outperform these benchmarks from year 2006 to year 2015, and that all smart beta strategies outperform the SSE 50 index by an average of 2.57% per year. In turn, these strategies improve the Sharpe Ratio by 46.2% on average.