Scientific Beta

The webinar will compare "bottom-up" methodologies that rely on multi-factor score-weighting to build concentrated portfolios to achieve higher composite exposure across targeted factors with less concentrated "top-down" multi-factor approaches. The event will be hosted by Felix Goltz, Head of Applied Research at EDHEC-Risk Institute and Research Director at ERI Scientific Beta, on Thursday, 9 March, 2017 at 5.00pm CET / 11.00am EST.

The "Bottom-up versus top-down: What is the best method to use for the construction of multi-factor indices?" webinar will be held on Thursday, 9 March, 2017 at 5:00pm CET / 11.00am EST.

In light of increasing investor interest in multi-factor solutions, product providers have recently been debating the respective merits of the "top-down" and "bottom-up" approaches to multi-factor portfolio construction.

Our recent research shows that focusing solely on increasing factor intensity leads to inefficiency in capturing factor premia, as exposure to unrewarded risks more than offsets the benefits of increased factor scores. High factor scores in "bottom-up" approaches also come with high instability and high turnover.

Our approach considers cross-factor interactions in "top-down" portfolios through an adjustment at the stock selection level. This approach, while producing lower factor intensity than "bottom-up" methods, leads to higher levels of diversification and produces higher returns per unit of factor intensity. It dominates "bottom-up" approaches in terms of relative performance, while considerably reducing extreme relative losses and turnover.

The objective of this webinar is to compare "bottom-up" methodologies that rely on multi-factor score-weighting to build concentrated portfolios to achieve higher composite exposure across targeted factors with less concentrated "top-down" multi-factor approaches.

Topics covered include:

• Considering cross-sectional negatives of single factor indices, seeking maximum exposure to rewarded factors, portfolio concentration versus diversification; what are the issues behind the bottom-up versus top-down debate?
• From beta to stock picking: do stock factor champions exist?
• What are the limits of bottom-up approaches?
• Can we reconcile the top-down approach and consideration of cross-sectional negatives of single smart factor indices combinations?
• What method can be used to maximise the benefits of factor investing?

The webinar will be hosted by Felix Goltz, Head of Applied Research at EDHEC-Risk Institute and Research Director at ERI 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.

Please note that participation in the webinar is by invitation only. To request an invitation, please contact Séverine Cibelly at severine.cibelly@scientificbeta.com or on +33 493 187 863, or visit the dedicated registration website. There is no charge for participating in the webinar.