Performance Evaluation of Fundamental Indexation Strategies on the NASDAQ OMX Baltic Stock Exchange

Fabio Filipozzi, Rando Tomingas


This paper studies the fundamental indexing approach to the Baltic Stock market. Using
sales, EBITDA, EBIT, net income, book equity and composite metrics as a basis for reweighting
the capitalisation-weighted OMX Baltic Benchmark Gross Index makes it
apparent that fundamental indices outperformed the benchmark index throughout the
period 2006–2016. As for applications to fundamentally indexing in bigger markets, the
Fama-French four-factor analysis confirms the active exposure of the fundamental indices
to the value factor, and to a lesser extent to the size factor. After adjustment for these risk
exposures, four of the six fundamental indices here analysed still significantly outperform
the benchmark index, confirming that these smart beta indices are more rewarding when
applied to smaller, less covered markets. The outperformance is significant both economically
and statistically.

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