Sector SPDR ETF Volume Factor Model

We reconstruct the sector SPDR ETFs using their top five constituents, applying a novel technical analysis approach. Technical means using price and volume data rather than fundamentals. This approach is unique and novel to this article and is done using its aggregated excess (Capital-Weighted Volume, CWV), up volume times price times market capitalization (Capital-Weighted Up Volume, CWUV) over down volume times price times market capitalization (Capital-Weighted Down Volume, CWDV). Our strategy is to buy when the capital-weighted volume (CWV) exceeds its 50-day exponential moving average (EMA) and reduce exposure by 50% when it falls below. Exposure is further decreased by 50% if the capital-weighted down volume (CWDV) drops below its 50-day EMA, while a volume price confirmation indicator (VPCI) VBOT signal increases exposure back to 100%. This is combined with a 30-, 60-, or 90-week VPCI VBOT time stop, after which the capital-weighted volume strategy is resumed. To refine the strategy, we also average capital-weighted and dollar volumes over 40 to 50 weeks. Our results, reported in the exhibit, identify the best-performing strategy for each sector SPDR, highlighting those that exceed sector returns in both risk and return. The Energy, Technology, Financials and Industrials sectors benefit most.