TY - JOUR T1 - Smart Beta Efficiency versus Investability: <em>Introducing the Cost-Adjusted Factor Efficiency Ratio</em> JF - The Journal of Index Investing SP - 6 LP - 18 DO - 10.3905/jii.2017.8.1.006 VL - 8 IS - 1 AU - Daniel Ung Y1 - 2017/05/31 UR - https://pm-research.com/content/8/1/6.abstract N2 - Increasing factor exposure is generally desirable, ceteris paribus, but it often comes at a cost; those costs may include expenses arising from more regular rebalancing or purchasing less liquid stocks. For this reason, there is a necessary trade-off between increasing exposure and greater investability. In this article, the author focuses on the financial trade-off between achieving greater targeted exposure and ensuring investability. To this end, he introduces a new smart beta metric—the cost-adjusted factor efficiency ratio—as an adaptation to the metric Hunstad and Dekhayser proposed in order to acknowledge such a trade-off.TOPICS: Factor-based models, performance measurement ER -