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The MarketGrader China A-Shares Size Indexes: Tools for Strategic & Tactical Asset Allocation – Part 2


This paper is structured as follows: The next section of this paper presents the historical total return performance of the MG China A LC 80 and the MG China A SC 120 indexes and compares them to their benchmarks, the CSI 300 Index and CSI 500 Index, respectively. This is followed by a discussion of the historical small cap risk premium prevalent in the Mainland China equity market. The section following that provides an illustration of the MarketGrader size indexes in a tactical asset allocation (TAA) framework. This section introduces two index-of-indexes comprised of the MG China LC 80 and the MG China SC 120 – a market capitalization version and a proportionally weighted version. Both the index-of-indexes can be used as a benchmark for TAA strategies. Since the index-of-indexes essentially pro- vides exposure to 200 components (MG China A 80 + MG China A 120), this section also includes a comparison of the performance of the two index-of-indexes TAA benchmarks to the MarketGrader China A-Shares 200 Index (MG China A 200).3 The final section compares the sector exposures of the MG China A LC 80, the MG China A SC 120 and the MG China A 200 indexes.

This paper is the second in a three-part series that intro- duces two of the 12 recently launched indexes by Market- Grader as an expansion of its existing China-A Shares Index family. Parts 1 and 3 of this series cover the MarketGrader Mainland China Exchange Indexes and the MarketGrader China A-Shares Sector Indexes, respectively.

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