Performance Evaluation of Fundamental Indexation Strategies on the NASDAQ OMX Baltic Stock Exchange

Fabio Filipozzi and Rando Tomingas

Research in Economics and Business: Central and Eastern Europe, 2017, vol. 9, issue 2

Abstract: This paper studies the fundamental indexing approach to the Baltic Stock market. Usingsales, EBITDA, EBIT, net income, book equity and composite metrics as a basis for reweightingthe capitalisation-weighted OMX Baltic Benchmark Gross Index makes itapparent that fundamental indices outperformed the benchmark index throughout theperiod 2006–2016. As for applications to fundamentally indexing in bigger markets, theFama-French four-factor analysis confirms the active exposure of the fundamental indicesto the value factor, and to a lesser extent to the size factor. After adjustment for these riskexposures, four of the six fundamental indices here analysed still significantly outperformthe benchmark index, confirming that these smart beta indices are more rewarding whenapplied to smaller, less covered markets. The outperformance is significant both economicallyand statistically.

Date: 2017
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