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Myths about fundamental indexing

Tijdschriftbijdrage - Tijdschriftartikel

Fundamental indexing starts from the observation that in a value- weighted portfolio, any overpricing affects the stock’s portfolio weight upward and its typical return downward, and vice versa; but on average the ‘drag’ on the portfolio’s expected return caused by this negative interaction is avoided if weights are based instead on accounting-based instruments for true value. We find that the drag effect is statistically and economically unimportant. Our empirical work avoids regression- based alphas, which are flawed by demonstrable instabilities in the exposures.
Tijdschrift: Investment Analysts Journal
ISSN: 1029-3523
Issue: 4
Volume: 47
Pagina's: 304 - 326
Jaar van publicatie:2018
BOF-keylabel:ja
IOF-keylabel:ja
BOF-publication weight:0.1
CSS-citation score:1
Auteurs:International
Authors from:Higher Education
Toegankelijkheid:Open