Scientific Beta

Automated Trader: "Presentation on preliminary research showing a strong theoretical argument in favour of factor investing (aka alternative risk premia or smart beta) under specific conditions, namely if the benchmarks being used are replicating portfolios for asset pricing factors - where the price of any payoff is given by the expectation of the product of the payoff with respect to a stochastic discount factor."

Automated Trader 01/04/2015

"(...) Event: EDHEC-Risk Days Europe
Presentation on preliminary research showing a strong theoretical argument in favour of factor investing (aka alternative risk premia or smart beta) under specific conditions, namely if the benchmarks being used are replicating portfolios for asset pricing factors - where the price of any payoff is given by the expectation of the product of the payoff with respect to a stochastic discount factor. (...)
"Diversification is not meant to help us cope with 2008-type events. We have other technologies for that - we have hedging, we have insurance…Diversification is simply meant to help us harvest risk premia in the most efficient way, by precisely diversifying away from our portfolios any kind of risk which is not rewarded." - Lionel Martinelli, professor of finance, EDHEC Business School and scientific director, EDHEC-Risk Institute.
"(Results show that) all allocation schemes do better than market cap weighting. I think that is a profound lesson and probably many of us (portfolio managers) are still very much bound to be market-cap allocation type paradigm. I think we really should challenge that." - Jaap van Dam, managing director, Investment Strategy, PGGM. (...)"