Smart beta failing to capitalise on source of excess returns

Comparing smart beta and market capitalisation strategies


In comparison to market capitalisation-based weighting, smart beta taps into various risk premia and behavioural anomalies that cap weighting overlooks and that are responsible for improved performance. But this explanation neglects to account for the fact that - unlike cap-weighted indexes - smart beta strategies are not buy-and-hold. They require trading and rebalancing to maintain their exposures. This can have a surprising impact on long-term performance, and may also provide a cause for

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