RT Journal Article
SR Electronic
T1 Multifactor Indexes Made Simple: <em>A Review of Static and Dynamic Approaches</em>
JF The Journal of Index Investing
FD Institutional Investor Journals
SP 87
OP 99
DO 10.3905/jii.2016.7.2.087
VO 7
IS 2
A1 Mehdi Alighanbari
A1 Chin Ping Chia
YR 2016
UL https://pm-research.com/content/7/2/87.abstract
AB Multifactor index fund allocations are increasingly becoming the preferred approach to factor investing. This article examines the return–risk characteristics of nine static and dynamic weighting strategies over a 36-year period. The results highlight that a simple strategy that equal weights multiple factor indexes has historically proved more effective than many of the more complex approaches—pointing to its potential as a way to combine factors, especially in the absence of active investment views and skills. However, a dynamic factor-weighting strategy based on fundamental signals also has merit if the investor believes she has the insight or skills required.TOPICS: Mutual funds/passive investing/indexing, analysis of individual factors/risk premia