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Momentum is a common factor in nearly all Smart Beta strategies. Momentum investors seek to ride a wave of strong performance by using recent three to twelve months data to make decisions on which stocks to sell and which stocks to buy. This practice is inherently risky because it’s focused on a narrow period and eschews the modern notion of the efficient-market theory. A CFA publication, Investment Risk, and Performance echoes this sentiment…

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Value is a primary factor in Smart Beta investing. The value investor takes a pragmatic approach to stock selection focusing on the fundamental of the company and their long-term ability to deliver profits and grow. The simple principle behind a value strategy is this: share price appreciation comes from purchasing stocks that are priced lower than the underlying value. In this post, we’ll look at how this factor influences the long-term growth of…

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As the famous adage states, “hindsight is always 20/20.” This truth forms the basis of a dangerous method to Smart Beta ETF construction: factor fishing. While understanding the past is simple investors should remember that history doesn’t always project the future. In this post, we’ll look at the problem of backtest fitting and how it can lead to a breakdown in the performance of a Smart Beta ETF. In The Journal of Investment…

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Who Are Smart Beta ETF Funds For?

Posted on: 28.10.2016
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A Smart Beta ETF strategy is for the investor seeking to outperform the total market. This new investment strategy that eschews the traditional market-cap weighting style is for those that believe superior value resides in companies with greater fundamentals. Investors engaging in a Smart Beta strategy have a close eye on the granular level, published formulas comprising the fund. This has a distinct advantage that’s less evident with traditional actively managed funds that…

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