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Scientific Beta

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  • Measuring Factor Exposure Better to Manage Factor Allocation Better
    Measuring Factor Exposure Better to Manage Factor Allocation Better
    Felix Goltz, Research Director, Scientific Beta. Recorded: Dec 13 2018 53 mins
    Factor investing offers a big promise. By identifying the persistent drivers of long-term returns in their portfolios, investors can understand which risks they are exposed to, and make explicit choices about those exposures.
    In a new white paper entitled “Measuring Factor Exposure Better to Manage Factor Allocation Better: A Critical Approach to Popular Factor Box Initiatives,” Scientific Beta presents a critical approach to popular factor box initiatives through two contributions questioning the choice of factor menu and factor proxies and the way in which the measurement of the latter is implemented.
    When it comes to information about factors, providers offer analytic toolkits to identify the factor exposures of an investor's portfolio. However, these analytic tools do not employ academically grounded factors and their factor finding process maximises the risk of ending up with false factors. These non-standard factors also lead to mismeasurement of exposures and may capture exposure to redundant factors. In the end, analytic tools for investors do not deliver on the promise of factor investing and they also lack transparency.
    Additionally, we may question the way in which the measurement of factor proxies is implemented. Most popular factor analysis tools used by investors deviate from the models used in research because they choose to use factor scores instead of betas. An additional problem is that the one-dimensional nature of factor scores does not take into account correlations across different factors. This leads to the double counting of the exposures of factors that are highly correlated. Lastly, many popular factor scores combine variables into composite factor scores. Combining factor scores into composite scores makes the mismeasurement problems worse as composites from skewed score distributions may be biased towards one of the variables.
    This webinar will review these issues of factor risk measurement and will show how these can be countered.
  • What is the best way to construct multi-factor indices?
    What is the best way to construct multi-factor indices?
    Eric Shirbini, PhD, is Global Research and Investment Solutions Director with Scientific Beta Recorded: Apr 26 2018 40 mins
    In this webinar, we 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 themes covered during the webinar also 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 alpha to 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?
  • Factor Investing in Long/Short Strategies
    Factor Investing in Long/Short Strategies
    Eric Shirbini, PhD, is Global Research and Investment Solutions Director with Scientific Beta Recorded: Apr 19 2018 40 mins
    In this webinar, we are going to present new research on how to harvest factor premia without suffering from market volatility. This integrated approach breaks with the traditional practices of L/S factor investing, which are often based on poor risk management practices. It also enables investors to leverage the performance offered by this kind of strategy in the most efficient way possible.
    - The limitations of traditional L/S approaches in smart beta and factor investing.
    - Robust market estimation of beta and improvement of the market neutrality of L/S strategies.
    - Risk management as a source of performance.
  • Introducing Narrow High Factor Intensity Indices
    Introducing Narrow High Factor Intensity Indices
    Eric Shirbini, PhD, is Global Research and Investment Solutions Director with Scientific Beta Recorded: Feb 26 2018 42 mins
    Scientific Beta has produced a series of single narrow high factor intensity indices. These narrow smart factor indices have strong exposure to the desired factor tilt but are nevertheless well diversified through the application of a multi-strategy weighting scheme, thus remaining consistent with the Smart Beta 2.0 approach developed by EDHEC-Risk Institute and Scientific Beta. These indices provide more pronounced factor exposure at the single factor level and can possibly be used in custom allocation solutions, notably in the case of factor overlay, because these indices:
    - Significantly strengthen the allocation of the overall portfolio to the selected risk factor through the strong exposure to this factor
    - Avoid altering the exposures to the other rewarded factors and preserve a very good level of factor intensity through the presence of a high factor intensity filter
  • Misconceptions and Misselling of Smart Beta
    Misconceptions and Misselling of Smart Beta
    Eric Shirbini, PhD, is Global Research and Investment Solutions Director with Scientific Beta Recorded: Feb 13 2018 42 mins
    In this keynote, we are going to discuss the following topics:
    - What are the bias and unrewarded and undocumented risk exposures that can affect the performance of smart beta and factor benchmarks?
    - The macro-economic risks incorporated in equity factor investing solutions and the way in which they are reflected in the global risk allocation of the portfolio
    - How to evaluate and communicate on the risks of smart beta policy benchmark with respect to the different stakeholders?

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