The traditional active vs passive debate has been shaken up by the emergence of “smart beta” strategies. As the population of these products has exploded, the quest to differentiate among them has focused on portfolio construction techniques rather than what actually matters, namely...

We investigate whether structurally hedging the currency risk of global equity products benefits long-term investors. Based on a 35 year back-test of 3 smart beta strategies from 6 currency perspectives, our answer is a qualified “yes”. Currency hedging was effective in reducing risk and...

We customize factor attribution for quantitative equity portfolios to better align the measurement of factor returns with how factor tilts were taken on. Specifically, we provide a theoretical argument for including the absolute value of factor exposures in the attribution to account for the...

We propose an adjustment of standard regression-based factor attribution to address a common issue: implementation constraints often mean that investors cannot realize the full potential of a factor strategy, but standard attribution analysis assumes that they can – leaving part of the...

Existing implementations of factor attribution only explain part of a quantitatively managed portfolio's return, even when factor models are all that is behind the investment strategy. We propose an alternative method that aligns stock-specific risk in how exposure to factors is taken in the...

We found that it is important to address currency risk to take full advantage of the benefits of minimum-volatility investing. In our backtest that extended back to 1979, we found that hedging currency risk would have led to a higher Sharpe ratio by decreasing risk while maintaining return at a...