As smart beta strategies gain in popularity, there are concerns that flows into these strategies will ultimately cancel out their benefits. This special webinar examines the crowding risk of smart beta strategies and details Scientific Beta's new research that has failed to find evidence that smart beta strategies have been adversely affected by a crowding effect.
Overview
As smart beta strategies gain in popularity, there are concerns that flows into these strategies will ultimately cancel out their benefits. However, such claims are rarely based on solid empirical evidence. The academic literature has not only documented risk premia for the standard factors but has also provided theoretical explanations for persistence, notably if factors are compensation for taking on additional types of risk. Moreover, precautions against crowding risks can be taken by proper implementation of factor investing and smart beta indices. In particular, the best precaution against crowding seems to be diversification.
It is possible that smart beta and factor strategies can be subject to adverse effects due to a wide following but one can only conclude that this is the case if there is evidence for it. Losses in a given strategy, meanwhile, are not evidence of crowding. Periodic underperformance may be due to normal fluctuations in prices.
The webinar examines the crowding risk of smart beta strategies and details Scientific Beta's new research that has failed to find evidence that smart beta strategies have been adversely affected by a crowding effect.
Host
The webinar was hosted by Felix Goltz, Research Director at Scientific Beta. Dr. Goltz carries out research in empirical finance and asset allocation, with a focus on alternative investments and indexing strategies. His work has appeared in various international academic and practitioner journals and handbooks. He obtained a PhD in finance from the University of Nice Sophia-Antipolis after studying economics and business administration at the University of Bayreuth and EDHEC Business School.
Date/Time
Tuesday 16 June, 2020 at 4.00pm CET.