The publish-or-perish syndrome and the smart beta movement have motivated academics and practitioners to come up with a spate of new factors. How can investors determine which ones are legitimate and how to use them in their equity portfolios?
Investors devote significant resources to deciding whether a manager is skillful. When it comes to passive investing, they appear to lose their critical faculties.
It’s not merely interesting that the value premium tends to revert toward the long-term average; it’s strategically consequential, too.
Value investing is uncomfortable because it goes against our genetic programming; on our evolutionary path, fear and greed probably served to keep us safe.
Many investors piled on the equity bandwagon this year, pushing prices up to dizzying heights. With current yields for U.S. equities at record lows, is it time to get off the bandwagon?
Fundamentals-weighted index investing extracts the value premium through contrarian rebalancing in a diversified core portfolio.
The conventional ex-post risk measures of tracking error and the information ratio must be reinterpreted for Smart Beta strategies.
Smart Beta’s efficiency comes, not from optimization, but from a more balanced distribution across equity premium sources.
Active quant strategies primarily seek alpha through proprietary return forecasting. In contrast, Smart Beta strategies are a good fit for the core equity portfolio.
What is Smart Beta and how can it help investors? In the first part of a new series, CIO Jason Hsu relates Smart Beta to traditional passive and active management.
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