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The Journal of Index Investing

The Journal of Index Investing

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Article

Smart Beta ETFs: A Bird’s-Eye
View of the Market and Analysis of Its Performance Trends

Seddik Meziani
The Journal of Index Investing Summer 2014, 5 (1) 146-157; DOI: https://doi.org/10.3905/jii.2014.5.1.146
Seddik Meziani
is a professor of finance at Montclair State University in Montclair, NJ. meziania@mail.montclair.edu
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Abstract

A new category of exchange-traded funds, which can arguably be referred to as “smart beta ETFs,” has lately issued a meaningful challenge to traditional, market-value-oriented ETFs. Although the concept seems new, a review of the relevant academic literature shows that most of these new ETFs find their roots in traditional ETFs.

After having divided smart beta ETFs into three distinct categories, a thorough review shows that their share of the overall ETF market is rapidly expanding. In particular, factor and fundamental smart beta ETFs have established themselves as the dominant duo relative to low-volatility ETFs. But in terms of risk-adjusted performance, this study shows that investors in smart beta ETFs have, on average, not been appropriately compensated for the risks they have taken in comparison to investors who put their money into more traditional, cap-weighted ETFs.

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The Journal of Index Investing: 5 (1)
The Journal of Index Investing
Vol. 5, Issue 1
Summer 2014
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Smart Beta ETFs: A Bird’s-Eye
View of the Market and Analysis of Its Performance Trends
Seddik Meziani
The Journal of Index Investing May 2014, 5 (1) 146-157; DOI: 10.3905/jii.2014.5.1.146

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Smart Beta ETFs: A Bird’s-Eye
View of the Market and Analysis of Its Performance Trends
Seddik Meziani
The Journal of Index Investing May 2014, 5 (1) 146-157; DOI: 10.3905/jii.2014.5.1.146
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  • Article
    • Abstract
    • SMART BETA AND THE MODERN PORTFOLIO THEORY
    • SMART BETA INVESTMENT STRATEGIES AND THE ETF MARKET
    • SMART BETA ETFS AND MARKET PERFORMANCE
    • CONCLUSION
    • ENDNOTES
    • REFERENCES
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More in this TOC Section

  • Smart Beta Multifactor Construction Methodology: Mixing versus Integrating
  • Stacking Blocks or Mixing Paints? Modular and Integrated Approaches to Factor Portfolio Construction
  • The Curious Case of the Mid-Cap Premium
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