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Article

Performance of Dividend Exchange-Traded Funds during Bull and Bear Markets

Srinidhi Kanuri, Davinder Malhotra and Robert McLeod
The Journal of Index Investing Summer 2017, 8 (1) 19-28; DOI: https://doi.org/10.3905/jii.2017.8.1.019
Srinidhi Kanuri
is an assistant professor of finance in the College of Business in the Department of Finance, Real Estate, and Business Law at the University of Southern Mississippi in Hattiesburg, MS. srinidhi.kanuri@usm.edu
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Davinder Malhotra
is a professor of finance in the School of Business Administration at Philadelphia University in Philadelphia, PA. malhotrad@philau.edu
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Robert McLeod
is a professor of finance in the Culverhouse College of Commerce in the Department of Economics, Finance, and Legal Studies at the University of Alabama in Tuscaloosa, AL. rmcleod@cba.ua.edu
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Abstract

This study investigates the performance of dividend exchange-traded funds (ETFs) during both bull and bear markets. The authors compare their performance to a proxy for the U.S. market as measured by the S&P 500 ETF (IVV). Using data from Morningstar Direct, they construct equally weighted portfolios of dividend ETFs and compute their absolute and risk-adjusted returns for the period 2004 through 2014. The study finds that dividend ETFs are much more expensive than IVV and are highly correlated with IVV. Over the entire period of study, the performance of the dividend ETF portfolio was marginally better than that of IVV; the portfolio marginally outperformed IVV during two bull markets (January 2004 to September 2007 and April 2009 to December 2014), but it also marginally underperformed IVV during the most recent bear market (October 2007 to March 2009), which means that dividend ETFs are more volatile than IVV. The sample period is limited because the first dividend ETF was created in late 2003. Investors in dividend ETFs, who were expecting to receive superior returns during volatile markets, would not have achieved the results that they anticipated.

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The Journal of Index Investing: 8 (1)
The Journal of Index Investing
Vol. 8, Issue 1
Summer 2017
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Performance of Dividend Exchange-Traded Funds during Bull and Bear Markets
Srinidhi Kanuri, Davinder Malhotra, Robert McLeod
The Journal of Index Investing May 2017, 8 (1) 19-28; DOI: 10.3905/jii.2017.8.1.019

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Performance of Dividend Exchange-Traded Funds during Bull and Bear Markets
Srinidhi Kanuri, Davinder Malhotra, Robert McLeod
The Journal of Index Investing May 2017, 8 (1) 19-28; DOI: 10.3905/jii.2017.8.1.019
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