Malkiel: Smart Beta = Smart Marketing Doesn't Equal Smart Investing: "In traditional index funds, stocks are selected and weighted according to each company's market capitalization. Smart-beta strategies weigh a portfolio's stocks on book value, cash flows and dividends, and then tweak portfolios by adding what Malkiel calls “a trick or tilt toward another factor, by weight, by value or by earnings.”
The aim of smart beta is to increase the return without raising volatility. But Malkiel, the former dean of Yale School of Management, pounced on Rob Arnott, founder and chair of Research Affiliates, acclaimed for smart beta plays and his RAFI fundamentals-based indexes, to attack the strategy."
'via Blog this'