Scientific Beta

Financial News: "However, Eric Shirbini, global product specialist at EDHEC’s indexing venture ERI Scientific Beta, said most new smart beta developments lacked supporting research other than back-testing. Some strategies also amend established factors to make them proprietary."

Financial News 09/06/2015

"(...) Paris-based academic institute EDHEC-Risk identifies four factors underpinning smart beta strategies that research suggests deliver reliable, long-term performance: value, momentum, low volatility and size. In a report published in March, EDHEC said there was evidence that two more factors – high profitability, and low investment – could be successful in the long run. Both strategies aim to tilt portfolios to “high quality” stocks, as characterised, for example, by high profitability, stable earnings or low leverage. However, Eric Shirbini, global product specialist at EDHEC’s indexing venture ERI Scientific Beta, said most new smart beta developments lacked supporting research other than back-testing. Some strategies also amend established factors to make them proprietary. Shirbini said: “We are really against that, because as soon as you start modifying the factors you don’t know what risks you are actually giving the investor.” (...)"