Smart Beta Benchmarking A statistical perspective. Factor-based (often called “strategic beta” or more conventionally—and in this paper —“smart beta”) exchange-traded funds (ETFs) were introduced to the investment community with the goal of providing value through selecting, weighting, and rebalancing holdings by utilizing different characteristics or factors than traditional market capitalization-weighted ETFs. Building on the factor-based stock research of the Fama-French model, the smart beta alternative portfolio construction process aims to enhance returns, reduce volatility in dierent stages of the economic cycle, minimize risk, and maintain diversication. Instead of tracking market capitalization- or liquidity-weighted benchmarks that are solely focused on uctuations in price, s

Join for free to read