Academic consensus is key to robust smart beta strategies
(Thomson Reuters ONE) -
New publication from ERI Scientific Beta examines the robustness of smart beta
strategies
A new publication from ERI Scientific Beta, the index arm of EDHEC Risk
Institute, entitled "Robustness of Smart Beta Strategies," reviews the
importance of robustness for smart beta strategies, explains various methods by
which smart beta strategies try to improve robustness, and discusses how to
measure and assess robustness when analysing the performance of smart beta
strategies.
ERI Scientific Beta underlines the importance of trusting academic consensus at
a time when the number of factors available is increasingly rapidly. The good
idea of factor investing should not be transformed into factor fishing and data
mining.
The study shows that there is no positive and statistically significant long-
term risk premium for a "value" factor definition that relies on the approach
termed "fundamental," even though this approach is highly popular with investors
and index providers. ERI Scientific Beta recommends that investors stick tightly
to academic consensus in the area of factor definition.
The study stresses the importance of measuring robustness correctly. The
measurement relies on the transparency of track records and the availability of
instruments to measure robustness, such as the probability of outperformance.
The probability of outperformance enables the smart beta index's capacity to
outperform to be measured for a chosen investment duration, whatever the
investment period.
This probability of outperformance measure allows one to observe that not alone
are smart beta indices different in terms of risk-adjusted performance, they are
not all equal in terms of robustness either. It confirms the quality of indices
produced with state-of-the-art academic research, such as the Scientific Beta
indices produced by EDHEC-Risk Institute, whether involving the definition of
the factors or the implementation of diversification techniques to obtain high-
performance proxies for factors that are rewarded over the long term.
A copy of the ERI Scientific Beta publication, "Robustness of Smart Beta
Strategies," can be accessed here.
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As part of its policy of transferring know-how to the industry, EDHEC-Risk
Institute has set up ERI Scientific Beta. ERI Scientific Beta is an original
initiative which aims to favour the adoption of the latest advances in smart
beta design and implementation by the whole investment industry. Its academic
origin provides the foundation for its strategy: offer, in the best economic
conditions possible, the smart beta solutions that are most proven
scientifically with full transparency of both the methods and the associated
risks.
ERI Scientific Beta, 1 George Street, #07-02, Singapore 049145. For further
information, please contact: Séverine Cibelly, Tel.: +33 493 187 863, E-mail:
severine.cibelly(at)scientificbeta.com, Web: www.scientificbeta.com.
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Press release - ERI SciBeta Robustness:
http://hugin.info/157174/R/1872204/659212.pdf
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originality of the information contained therein.
Source: EDHEC-Risk Institute via GlobeNewswire
[HUG#1872204]
Unternehmensinformation / Kurzprofil:
Datum: 18.11.2014 - 10:14 Uhr
Sprache: Deutsch
News-ID 353386
Anzahl Zeichen: 4067
contact information:
Town:
Nice
Kategorie:
Business News
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"Academic consensus is key to robust smart beta strategies"
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