Sector ETF Analysis: Relative Performance And Flows

By Shane Obata  @sobata416

Introduction

The purpose of this analysis was to examine the relationships between relative performance and ETF flows. Relative performance was defined as the excess returns of nine sector SPDR ETFs over the S&P 500. ETF flows were defined as the net weekly flows, adjusted for price movements.

From a practical standpoint, it was useful to examine relative performance because adept sector rotation can lead to alpha generation. For example, a portfolio manager (PM) who was overweight financials and underweight energy from 2009 to 2017 would have fared better than another PM whose allocations were in line with the S&P 500’s sector weights.

It was also useful to examine flow data because...