In this report, I take a look at the Vanguard Small-Cap Index fund. Vanguard Small-Cap ETF (VB) tracks the performance of the CRSP US Small Cap Index, which measures the investment return of small-capitalization stocks. This index fund provides a convenient way to match the performance of a diversified group of small companies which allows a passively managed, full-replication approach.
VB holds a standard deviation and mean monthly return of 0.049699 and 0.013227 compared to SPY's of 0.036872 and 0.011377. By this comparison, VB seems to hold a consistently higher rate of return compared to SPY. Upon calculating VB's Sharpe ratio of 0.246023893 and SPY's of 0.281432549. This means that according to the Sharpe ratio, the Portfolio with SPY has a higher "bang for your buck".
I had then attached the Fama and French factor premiums first running the regressions analysis with one factor, and next, with three. After running the regressions it was found that not of the alphas for either the one factor nor the three factor were significant. This means the alphas were not larger than the p-value for any of the regressions.
After calculating the return portfolio based on the betas and alphas, it pulled back a -3% return on this portfolio. Upon this, I would not recommend investing in this portfolio purely based on the negative return.