Smart Beta Is Not Monkey Business

Amenc, Noël; Goltz, Felix; Lodh, Ashish

doi:10.3905/jii.2016.6.4.012

Cited by 9 publications

(3 citation statements)

References 18 publications

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“…Investment Management and Financial Innovations, Volume 19, Issue 3, 2022 http://dx.doi.org/10.21511/imfi.19(3).2022 25. this Smart Beta -September 2021.…”

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Smart beta portfolio investment strategy during the COVID-19 pandemic in Indonesia

Salim

Iradianty

Kristanti

et al. 2022

Investment Management and Financial Innovations

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Covid-19 has an impact on stock investment, especially in Indonesia, marked by the decline in the Jakarta Composite Index (JCI) at the beginning of the Covid-19 pandemic. During the Covid-19 era, there was a lot of negative information about the uncertainty of the market, which made investors irrational about the choice of stocks in the portfolio. So this research will have a hypothesis that the High Volatility stock group will be the best portfolio in Covid-19 conditions. The sample used is the Group of stocks that have the largest market capitalization value in JCI. Stocks with large market caps are chosen because of one of the indicators of blue chip stock. The sample will be divided into three portfolio groups, High Volatility, Moderate Volatility, and Low Volatility. The results obtained that High Volatility became the best portfolio during the Covid-19 period. The results of this study prove that the group of stocks with High Volatility will get positive returns and sharpe performance results are the highest and positive, compared to moderate volatility and low volatility portfolios. This result arises because stocks with High Volatility are subject to large price fluctuations and in this situation, investors can invest in these stocks in a short time frame. The short-term process is carried out regularly so that it can be in accordance with investors' expectations for investments in the portfolio.

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“…Investment Management and Financial Innovations, Volume 19, Issue 3, 2022 http://dx.doi.org/10.21511/imfi.19(3).2022 25. this Smart Beta -September 2021.…”

mentioning

confidence: 99%

Smart beta portfolio investment strategy during the COVID-19 pandemic in Indonesia

Salim

Iradianty

Kristanti

et al. 2022

Investment Management and Financial Innovations

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“…Monkey portfolios refer to randomly generated portfolios. Amenc et al (2016) actually compare smart beta portfolios to monkey portfolios. Their evidence suggests that smart beta strategies display pronounced differences in performance characteristics based on factor exposures, such as value, size, momentum, profitability, volatility, diversification and weighting strategies.…”

Section: Introductionmentioning

confidence: 99%

Are smart beta funds really smart? Evidence from rational and quasi-rational investor sentiment data

Verma

Soydemir

Huang

2019

RBF

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Purpose The purpose of this paper is to examine the relative effects of rational and quasi-rational sentiments of individual and institutional investors on a set of smart beta fund returns. The magnitudes of the impacts of institutional investor sentiments are greater than those of individual investor sentiments. In addition, both rational and quasi-rational sentiments of individual and institutional investors have significant impacts on smart beta fund returns. The magnitudes of the impacts of quasi-rational sentiments are greater than those of the rational sentiments for both types of investors (quasi-rational sentiments of institutional investors have the maximum impact). These results are consistent with the arguments that professional investors consider the sentiments of individual investors as contrarian leading indicators which are mainly driven by noise while conform the sentiments of institutional investors which are driven by more rational factors. A majority of smart beta funds in the sample outperform the S&P500 returns in the short term but fail to consistently beat the market. The authors find evidence that smart beta funds with consistently high returns are relatively less (more) driven by individual (institutional) investor sentiments. Overall, the authors argue that smart beta funds appear to follow quasi-rational sentiments of both individual and institutional investors that are not rooted in economic fundamentals. Design/methodology/approach The results of the impulse functions generated from a multivariate model suggest that the smart beta fund returns are negatively (positively) impacted by individual (institutional) investor sentiments. Findings The magnitudes of the impacts of institutional investor sentiments are greater than those of individual investor sentiments. In addition, both rational and quasi-rational sentiments of individual and institutional investors have significant impacts on smart beta fund returns. The magnitudes of the impacts of quasi-rational sentiments are greater than those of the rational sentiments for both types of investors (quasi-rational sentiments of institutional investors have the maximum impact). Originality/value These results are consistent with the arguments that professional investors consider the sentiments of individual investors as contrarian leading indicators which are mainly driven by noise while conform the sentiments of institutional investors which are driven by more rational factors. A majority of smart beta funds in the sample outperform the S&P500 returns in the short term but fail to consistently beat the market. The authors find evidence that smart beta funds with consistently high returns are relatively less (more) driven by individual (institutional) investor sentiments. Overall, the authors argue that smart beta funds appear to follow quasi-rational sentiments of both individual and institutional investors that are not rooted in economic fundamentals.

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“…Recent debates have emerged between those who believe the term "smart beta" is simply marketing hype (Malkiel (2014), Podkaminer (2015)) and those who believe there is true value to these strategies (Amenc, Goltz and Lodh (2016)). On the other hand, strategic beta investing looks to allocate more efficiently to "style" portfolios to capture systemic sources of market risk premiums.…”

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confidence: 99%

Smart Equity Investing: Implementing Risk Optimization Techniques on Strategic Beta Portfolios

2018

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We examine the performance of risk-optimization techniques on equity style portfolios. To form these portfolios, also called Strategic Beta factors by practitioners and data providers, we group stocks based on size, value and momentum characteristics through either independent or dependent sorting. Overall, performing risk-oriented strategies on style portfolios constructed with a dependent sort deliver greater abnormal returns. On average, we observe these strategies to significantly outperform 42% of the risk-oriented ETFs listed on US exchanges, compared to 31% when the risk-oriented strategies are performed on portfolios formed with an independent sort. We attribute the outperformance yielded by dependent sorting to the fact that it provides a better stratification of the set of stocks' opportunity and diversification properties. Classification Codes: 370, 380

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Smart Beta Is Not Monkey Business

Cited by 9 publications

References 18 publications

Smart beta portfolio investment strategy during the COVID-19 pandemic in Indonesia

Smart beta portfolio investment strategy during the COVID-19 pandemic in Indonesia

Are smart beta funds really smart? Evidence from rational and quasi-rational investor sentiment data

Smart Equity Investing: Implementing Risk Optimization Techniques on Strategic Beta Portfolios

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