Index Investing: From Theory to Practice · Dr MAI Huu Minh, TRAN Phan Bao Ngoc & HUYNH Nguyen Quoc BuuChapter 7 of 37 · Module 2: Theory
CHAPTER 7
Factors and Smart Beta
Value, size, momentum, quality, low volatility — and the rules that capture them
Opening question
“A 'smart beta' ETF promises market returns with less risk, or more return for the same risk. Is it a better index — or an active fund in disguise?”
In this chapter
- From the CAPM's single factor to multi-factor models: Fama–French, Carhart and beyond
- The main factors: value, size, momentum, quality, low volatility and dividend
- Why factor premia might exist: risk, behaviour or data mining
- Cyclicality, long drawdowns, crowding and costs
- Smart beta as rules-based active management
- Multi-factor indexes
- Factors in Vietnam: VNDiamond, dividend indexes and the NXW Vietnam Dividend
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This chapter is in the full book
Chapter 1 is free to read online. The full text of chapter 7 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Index Investing: From Theory to Practice (Volume 1, NXW Investment Library).
Read Chapter 1 freeGet the full book — [email protected]Sections of this chapter
7.1 From one factor to many
7.2 Fama–French, Carhart and the multi-factor models
7.3 The main factors
7.4 Why might factor premia exist?
7.5 Cyclicality and long drawdowns
7.6 Crowding, capacity and costs
7.7 Smart beta: rules-based active management
7.8 Multi-factor indexes
7.9 Using factors wisely