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The Smart Beta Indexing Puzzle
2013
Social Science Research Network
In this article, we consider smart beta indexing, which is an alternative to capitalization-weighted (CW) indexing. In particular, we focus on risk-based (RB) indexing, the aim of which is to capture the equity risk premium more effectively. To achieve this, portfolios are built which are more diversified and less volatile than CW portfolios. However, RB portfolios are less liquid than CW portfolios by construction. Moreover, they also present two risks in terms of passive management: tracking
doi:10.2139/ssrn.2294395
fatcat:fo74x5naw5anvooqamjbxmvqm4