Scientific Beta

Three articles from the latest issue of the AsianInvestor EDHEC-Risk Institute Research Insights supplement specifically focus on smart beta, looking at smart factor indexing in the Asian markets and around the world, and the performance and implementation benefits of multi smart beta allocation in Asian equity markets.

If exposure to the right factors is the main source of performance of alternative equity, or “smart beta,” indices, the important question that arises is how best to reward investors for their choices of risk. Drawing on illustrations from Japan and Developed Asia Pacific ex Japan, we show, in an article entitled "Smart Factor Indexing in Asian Markets: Assessing the Performance of Well- Diversified Factor Indices for Japan and Developed Asia Pacific ex Japan", that a good smart beta index is one which diversifies away the specific risks and manages the exposure to equity risk factors.

In a further article, "Smart Factor Indexing Around the World", we then analyse the performance of smart factor indices in other developed economies (at a local level) and in the global developed stock universe.

Lastly, considerable empirical evidence exists on the presence of multiple risk factors in Asia-Pacific stock markets. In our article on "Multi Smart Beta Allocation in Asian Equity Markets: Performance and Implementation Benefits", we analyse the potential benefits of combining factor tilts.