Factor attribution based on linear regression often fails to satisfactorily explain the performance of systematic investment strategies. Sizeable attribution residuals that do not average out to zero over time suggest latent exposures to nonlinearities in factor returns. Our proposed adjustment...

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...