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MARCH 2017


Forecasting Smart Beta and Factors: History Is Worse than Useless

Rob Arnott, John West

Past is NOT prologue. The proliferation of smart beta and factor strategies brings with it data mining and performance chasing. Investors are best served by using relative valuations to forecast the long-term future returns of both smart beta strategies and factors. Useful forecasting models should also address implementation costs


Forecasting Factor and Smart Beta Returns (Hint: History Is Worse than Useless)

By Rob Arnott, Noah Beck, Vitali Kalesnik, 

February 2017 | Read Time: 30 min

Understanding the role relative valuations play in factor investing and smart beta strategies is important. Putting that knowledge into practice in the real world of asset management is critical. We show how valuations can be applied in forecasting factor and smart beta returns.