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Article

Practical Applications of Alpha Signals, Smart Beta, and Factor Model Alignment

Terry Marsh, Paul Pfleiderer and Gauri Goyal
Practical Applications Fall 2016, 4 (2) DOI: https://doi.org/10.3905/pa.2016.4.2.172
Terry Marsh
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Paul Pfleiderer
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Gauri Goyal
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Alpha Signals, Smart Beta, and Factor Model Alignment Terry Marsh Paul Pfleiderer

Abstract

How can a portfolio manager properly identify the underlying drivers of return and incorporate this information into a reliable risk model? In the process of portfolio evaluation and rebalancing, there can be a misalignment between the manager’s understanding of what drives returns—whether it is alpha or smart beta factors—and the risk model.

In Alpha Signals, Smart Beta, and Factor Model Alignment , Terry Marsh of the University of California, Berkeley and Quantal International and Paul Pfleiderer of Stanford University investigate smart beta and risk model forecasting. In this discussion with Marsh, he discusses the article and offers additional perspective on why he and his co-author decided to explore the drivers of return and the corresponding risk factors.

  • The content is made available for your general information and use and is not intended for trading or other specific investment advice purposes or to address your particular requirements. We do not represent or endorse the accuracy or reliability of any advice, opinion, statement, or other information provided any user of this publication. Reliance upon any opinion, advice, statement, or other information shall also be at your own risk. Independent advice should be obtained before making any such decision. Any arrangements made between you and any third party named in this publication are at your sole risk.
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Practical Applications: 4 (2)
Practical Applications
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Fall 2016
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Practical Applications of Alpha Signals, Smart Beta, and Factor Model Alignment
Terry Marsh, Paul Pfleiderer
Practical Applications Oct 2016, 4 (2) DOI: 10.3905/pa.2016.4.2.172

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Practical Applications of Alpha Signals, Smart Beta, and Factor Model Alignment
Terry Marsh, Paul Pfleiderer
Practical Applications Oct 2016, 4 (2) DOI: 10.3905/pa.2016.4.2.172
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