Index Investing

Index Investing - Articles & White Papers

This section lists research on index investing, but white papers on "smart beta", rather than plain vanilla indexing, have been the standout hot topic in this category. Smart beta strategies seek to identify "risk factors" which can generate excess return, and then seek to build factor models which tilt a portfolio away from the index in order to harvest alpha. With risk strictly controlled, portfolio managers will thereby seek to build a better beta; sometimes referred to as "fundamental beta" depending on the risk factors...

selected. Indeed, the selection of risk factors is a key consideration, and reports setting out a framework for assessing factors and implementing smart beta strategies, or providing new metrics for evaluating the efficiency of smart beta indices have proved very popular. Among the key proponents of smart beta, Research Affiliates has written a number of well-received papers, while Edhec have authored a number of technical papers, using the term "scientific beta". Northern Trust are one company who contend that, rather than a "buy and hold" approach to risk factors, different factors should be preferred at different times. Old school papers on index investing appear less frequently, but papers making the case for index-fund investing or comparing active versus passive strategies are still well-read. Indeed research from Towers Watson offers the perspective that there are too many active managers, and passive investment management should be more prevalent.

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