Massive S&P 500 buyback index outperformance of 25 years?

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Maverick2608

The S&P 500 buyback index was launched November 29, 2012 and has not outperformed the S&P 500 TR index over the last 5 years.

If you use Bloomberg's Total Return Analysis (TRA) function, you can see the return of the index back tested since January 31, 1994. Accordingly the index should have delivered a total annualized return of 16.1% versus 9.0% for the S&P 500 TR index – a massive annual outperformance of 7.1% over a 25-year period.

I find that hard to believe. Has anyone identified problems with Blomberg’s back test of indices or do you believe this reflects real outperformance?
 
I don't use Bloomberg, but perhaps it uses a different weighting and/or methodology to the S&P 500 free-float weighted effective reinvest-dividends-on-the-day-prior-to-the-ex-date which the S&P indices use. However, that figure seems screwy.

How about you ask them and report back their response here?
 
It could be true. There is ample
Evidence that buyback stocks perform well. I bet the buyback strategy underperformed from 95-2000 and then massively outperformed until 2012 when momentum took over again.

What’s the bbg ticker for the buyback index?
 
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Buyback ETF (PKW) has matched SPY returns over the long term. This ETF has slightly different methodology than S&P buyback index.

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Yes, backtest is unbelievable

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Maverick2608 said:
I find that hard to believe. Has anyone identified problems with Blomberg’s back test of indices or do you believe this reflects real outperformance?
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If you look at the S&P web site, they have a TR comparison too. It shows similar results (10 year p/a returns of 18.5% for the index and 14.99 for SPX). This said, a cursory look shows that the index has a beta of about 1.5-1.7 (simply judging by the depth of the drawdowns) so I am not that surprised by the performance.
 
sle said:
If you look at the S&P web site, they have a TR comparison too. It shows similar results (10 year p/a returns of 18.5% for the index and 14.99 for SPX). This said, a cursory look shows that the index has a beta of about 1.5-1.7 (simply judging by the depth of the drawdowns) so I am not that surprised by the performance.
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I agree that it looks like the index has a high beta and during a continuous long bull market it is fair to assume this will lead to outperformance.

However, going back 25 years including to major crises, if I had assembled an equal-weighted index of the 100 highest beta stocks in the S&P 500 on January 31, 1994, based on the literature I would not assume this index to have outperformed the S&P 500 over the last 25 years. Hence I would not attribute the outperformance (if real) of the buyback index to high beta.
 
I realize this will hurt my credibility. However, I just checked again and now Bloomberg returns 13.67% annualized return for the S&P 500 buyback TR index from 01/31/94 - 01/31/19 versus 9.26% annualized return for the S&P 500 TR index over the same period = 4.41% annualized outperformance.
 
The index was launched November 29, 2012. The annualized return since then has been 15.58% versus 13.37% for the S&P 500 TR index = 2.21 percentage points outperformance.
 
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