Choose Your Betas: <i>Benchmarking Alternative</i><i>Equity Index Strategies</i>

Amenc, Noël; Goltz, Felix; Lodh, Ashish

doi:10.3905/jpm.2012.39.1.088

Cited by 36 publications

(8 citation statements)

References 25 publications

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“…Our hedge fund portfolios can be used by an investor who is risk averse and our general portfolios in Figure 2 can be used to obtain higher returns. Looking back at the four portfolios, we can say that our beta is smart because it is a dynamic beta which adapts to the market movements [9].…”

Section: Discussionmentioning

confidence: 99%

“…The company which holds the highest market capitalization in a certain market index will be holding the largest weight in the cap weight portfolio. The cap weight portfolio acts to enhance the performance of the smart beta index since both of them consider the market information of the underlying assets [9]. Now we created four portfolios and implemented strategies which involved construction of a minimum variance portfolio and our smart beta index on them.…”

Section: Methodsmentioning

confidence: 99%

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Smart Beta Portfolio Optimization

Almahdi¹

2015

JMF

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Traditionally, portfolio managers have been discouraged from timing the market, for example, equity managers have been forced to adhere strictly to a benchmark with static or relatively stable components, such as the S&P 500 or the Russell 3000. This means that the portfolio's exposures to all risk factors should mimic as closely as the corresponding exposures of the benchmark. The main risk factor, of course, is the market itself. Effectively, a long-only portfolio would be constrained to have a beta of 1. More recently, however, managers have been given greater discretion to adjust their portfolio's risk exposures (especially, the beta of their portfolio) dynamically to match the manager's beliefs about future performance of the risk factors themselves. This freedom translates into the manager's ability to adjust the portfolio's beta dynamically. These strategies have come to be known as smart beta strategies. Adjusting beta dynamically amounts to attempting to "time" the market; that is, to increase exposure when one anticipates that the market will rise, and to decrease it when one anticipates that the market will fall.

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Section: Discussionmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

Smart Beta Portfolio Optimization

Almahdi¹

2015

JMF

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“…These issues have been frequently raised by investors trying to harvest factor premia (see Clarke et al, 2015). Along the same vein, Amenc et al (2012) discuss three diversification-based optimisation schemes for stock weighting and compare them to characteristics-based rules favoured by many index providers. We acknowledge the limitations of our approach in the sense that such an alternative approach would generate more insight into turnover and transaction costs issues, but we expect that these additional analyses would not change our overall findings.…”

Section: Approachmentioning

confidence: 99%

Investing in Systematic Factor Premiums

Koedijk

Slager

Stork

2016

Euro Fin Management

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In this paper we investigate and evaluate factor investing in the US and Europe for equities and bonds. We show that factor-based portfolios generally produce comparable or better portfolios than market indices. We expand the analysis to other asset classes and factors, work with other optimisation methods and add a basic liability structure. The results do not depend on adding other asset classes or on the removal of a specific factor. Finally, we study the results for a worldwide investor who invests beyond the US and Europe. Over the longer term and with consistently applied factor diversification, factor investing appears to be advantageous.

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“…In this paper, we take the stance to use the term "smart beta" as defined in Arnott and Kose (2014): "A category of valuation-indifferent strategies that consciously and deliberately break the link between the price of an asset and its weight in the portfolio, seeking to earn excess returns over the cap-weighted benchmark by no longer weighting assets proportional to their popularity, while retaining most of the positive attributes of passive indexing". Smart beta funds are sold on the premise that they outperform traditional market indices, as shortcomings in their weighting schemes based on market share, are overcome; see Amenc et al (2012) among others. As Chow et al (2011) and DeMiguel et al (2007) put it, smart investment strategies conserve the benefits of traditional benchmarks, giving vast market exposure and access to liquidity, while possessing a potential to perform better.…”

Section: -Fundamental Indexing: Literature and Practicementioning

confidence: 99%

Designing a Corporate Bond Index on Solvency Criteria

Stagnol¹

2015

SSRN Journal

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Doubts are rising whether bond indices, in the way they are constructed, are effective in their role of representing the markets they are designed for. Since index constituents are defined on market shares-the larger the debt obligation, the larger the share in the index-it may be that certain risks related to a high level of indebtedness are being accentuated and not necessarily representative of the market as a whole. Undue debt levels would in theory not arise in an informationefficient market, however, if prices are distorted, it makes sense to compensate for that and add elementary information on the debt issuers to the index construction process. We test how that works out on corporate bonds. We build a bond index that is based on firm accounting data rather than debt market value, and give evidence that it may serve as a market proxy.

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Choose Your Betas: Benchmarking AlternativeEquity Index Strategies

Cited by 36 publications

References 25 publications

Smart Beta Portfolio Optimization

Smart Beta Portfolio Optimization

Investing in Systematic Factor Premiums

Designing a Corporate Bond Index on Solvency Criteria

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