Scientific Beta

Traders: "A new study jointly published by Scientific Beta and Scientific Analytics entitled "Inconsistent Factor Indices: What are the Risks of Index Changes?" highlights the dangers of making frequent changes to index methodologies. The paper: provides concrete examples from industry practices and analyses the possible implications of such inconsistencies, namely changes in factor definitions, factor selection and portfolio construction principles; shows that methodological changes are quite common in the industry and sometimes happen across multiple dimensions at the same time, which can lead to striking differences in the performance of multi-factor indices."

Traders 28/03/2019

"(...) A new study jointly published by Scientific Beta and Scientific Analytics entitled "Inconsistent Factor Indices: What are the Risks of Index Changes?" highlights the dangers of making frequent changes to index methodologies.

The paper

provides concrete examples from industry practices and analyses the possible implications of such inconsistencies, namely changes in factor definitions, factor selection and portfolio construction principles
shows that methodological changes are quite common in the industry and sometimes happen across multiple dimensions at the same time, which can lead to striking differences in the performance of multi-factor indices. (...)"