ETF CONSUMER CYCLICALS CHUA GUI FENG THUN JIE

ETF CONSUMER CYCLICALS CHUA GUI FENG THUN JIE

ETF CONSUMER CYCLICALS CHUA GUI FENG THUN JIE REN JAREN WONG JIN QIAN DARYL XI ZICHAO YOU ZHIRUN CONSUMER CYCLICALS A category of stocks that rely heavily on the business cycle and economic conditions Include many industries, such as retail, auto, construction, restaurants and entertainment. Comprised of companies that produce goods and services that people want to buy but are not essential. This sector tends to underperform most other sectors when the economy is weak, and vice versa. Top holdings in consumer cyclical ETFs include Targetm Home Depot, Amazon and Walt Disney. CONSUMER CYCLICALS VS. NON-CYCLICALS BRIEF DESCRIPTIONS OF 7 ETFS TICKER Assets AD$V Average

Spread Expense Ratio FDIS 259.93M 2.65M 0.12% 0.08% IYC 791.43M 6.33M 0.04% 0.44% JHMC 28.45M 49.26K 0.01% 0.50% FXD 433.19M 5.31M 0.04% 0.61% RCD

81.77M 726.94K 0.27% 0.4% VCR 2.13b 11.83M 0.01% 0.1% XLY 12.09B 350.19M 0.05% 0.14% RECENT TRENDS On March 11th, PGA Group, the French carmaker was buying Opel, the European operation of Americas General Motors (GM). The White House is expected to announce plans to scrap an agreement with the auto industry that sets fuel-economy standards for the nations cars and trucks. METHOD OF RANKING Weighted average system based on: 1) Sharpe Ratio 2) Information Ratio 3) Variance Ratio 4) Fama-French Coefficient SHARPE RATIO Sharpe ratio is a

measure for calculating riskadjusted return. Sharpe Ratio Rank FDIS-US 0.9608 5 FXD-US 0.6902 1 IYC-US 0.9728 7 JHMC-US 0.7699 3 RCD-US 0.7075 2 VCR-US 0.9645 6 XLY-US 0.8482

4 INFORMATION RATIO Info Ratio Rank FDIS-US 0.4870 7 FXD-US -0.02118 5 IYC-US -0.5115 1 JHMC-US -0.1397 6 RCD-US -0.3030 4 VCR-US -0.4446 2 XLY-US

-0.3910 3 REASONS FOR LOW INFO RATIO Tracking Error caused by: Market capitalization weight adjustments. Imperfect timing to adjust stocks in the ETF Transaction costs SHARPE VS INFO FAMA-FRENCH MODEL FIT Adjusted Rsquared FDIS-US FXD-US IYC-US JHMC-US RCD-US VCR-US XLY-US Fama-French model not a good fit in general 0.3402 0.1620 0.3711 0.3132 0.1992 0.3419 0.3443 Important to look at the significance of individual factors FAMA-FRENCH COEFFICIENTS FDIS-US FXD-US

IYC-US Mkt-rf t-stat SMB t-stat HML t-stat intercept t-stat 1.6326 2.8279 0.5521 0.8335 -1.3386 -1.0305 0.0019 0.4229 1.4872 1.9668 0.6529 0.7525 -1.1461 -0.6736

0.0011 0.1826 1.6070 3.0561 0.4920 0.8154 -1.4321 -1.2105 0.0018 0.4404 1.4270 2.5670 0.8207 1.2868 -1.3909 -1.1120 0.0002 0.0542 1.4876 2.0104 0.6989 0.8232 -0.8947

-0.5374 0.0010 0.1790 1.6282 2.8578 0.5336 0.8163 -1.3665 -1.0660 0.0019 0.4322 1.6164 2.7778 0.4531 0.6787 -1.0510 -0.8027 0.0016 0.3618 JHMC-US RCD-US VCR-US XLY-US Portfolio is predominantly/has correlation with small-cap stocks and growth stocks

SMB and HML betas are not statistically significant FAMA-FRENCH BETA RANKING FDIS-US FXD-US IYC-US Mkt-rf Rank 1.6326 7 1.4872 2 1.6070 4 1.4270 1 1.4876 3 1.6282 6 1.6164 5 JHMC-US RCD-US VCR-US XLY-US

High beta stocks provides potentially higher returns due to greater volatility relative to the market We will favour those with high beta during a bull market Consumer cyclicals is a category of stocks that rely heavily on the business cycle and economic conditions. VARIANCE RATIO Random Walk Rejection Times Ranking FXD-US 0 1 JHMC-US 0 1 VCR-US 3 4 IYC-US 4 7 FDIS-US 2

3 XLY-US 4 7 RCD-US 4 7 Variance ratio (q from 2 to 10) is used to test random walk and martingale hypothesis. OVERALL RANK TICKER Random Walk Test Sharpe Ratio Intercept of FamaFrench Beta (MktRf) Average FXD-US 1 1 3 2

1.75 JHMC-US 1 3 1 1 1.5 VCR-US 4 6 7 6 5.75 XLY-US 7 4 4 5 5 FDIS-US 3 5 7

7 5.5 IYC-US 7 7 5 4 5.75 RCD-US 7 2 2 3 3.5 OUR L/S STRATEGY TICKER Beta (MktRf) Average L/S Strategy Capital Allocation FXD-US 2 1.75

Short 1.5M JHMC-US 1 1.5 Short 1.5M VCR-US 6 5.75 Long 1M XLY-US 5 5 Long 1M FDIS-US 7 5.5 Long 1M IYC-US

4 5.75 Long 1M RCD-US 3 3.5 Short 1M PERFORMANCE EVALUATION TICKER L/S Strategy Capital Allocatio n (M) Price (15 Mar) Price (28 Mar) P&L (M) FXD-US Short 1.5 36.90

36.48 +0.63 JHMC-US Short 1.5 27.35 27.38 -0.045 VCR-US Long 1 137.66 137.72 +0.06 XLY-US Long 1 87.52 87.19 -0.33 FDIS-US Long 1 34.45

34.38 -0.07 IYC-US Long 1 159.76 159.42 -0.34 RCD-US Short 1 92.50 92.23 +0.27 Total P&L: +0.175M THANK YOU!

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