Forecasting Smart Beta and Factors: History Is Worse than Useless

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

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