ETFs tracking the performance of pharmaceuticals have been for years recording returns that are better than expected from CAPM.
Cumulative Abnormal Returns Trends (CARTs) are trends of CARs calculated as below:
CAR = return for the instrument - instrument beta * return fot the broad market
ETFs tracking the performance of pharmaceuticals have been for years recording returns that are better than expected from CAPM, gaining abnormal returns.
The definite leader is PowerShares Dynamic Pharmaceuticals, which seeks investment results corresponding to the price and yield of the Dynamic Pharmaceuticals IntellidexSM Index. Since April 2010 the fund has experienced a CART of 145% (a trend move of 145% above S&P, considering beta value). For last seven years it has jumped by more than 200%, relative to S&P, considering beta value. SPDR S&P Pharmaceuticals, tracking S&P Pharmaceuticals Select Industry Index, was not much worse during this period and since the beginning of 2013 it has recorded even a slightly better CAR, exceeding 65%.
For an investor that entered the market after 2014 New Year celebration, iShares Dow Jones US Pharm Indx and RBS Global Big Pharma Exchange Traded Note would have given till now very similar returns to the former ones. However, PowerShares remains the most stable fund, with the lowest volatility. Its abnormal return is continual as the fund's CAR is 10% in 3 months, 12% in a month and 2% in 5 days. SPDR seems to remain second-best.
Pharmaceuticals sector beats S&P in short, medium and long-term.