RT Journal Article
SR Electronic
T1 Practical Applications of Multifactor Indexes Made Simple: <em>A Review of Static and Dynamic Approaches</em>
JF Practical Applications
FD Institutional Investor Journals
SP 1
OP 3
DO 10.3905/pa.2016.4.2.175
VO 4
IS 2
A1 Mehdi Alighanbari
A1 Chin Ping Chia
A1 Howard  Moore
YR 2016
UL https://pm-research.com/content/4/2/1.10.abstract
AB Multifactor Indexes Made Simple: A Review of Static and Dynamic Approaches Mehdi Alighanbari Chin Ping Chia Factor indexes are popular with both institutional and retail investors, who are increasingly using multifactor index allocations in pursuit of more reliable returns and the benefits of diversification.“Most multifactor indexes are constructed in a simple, straightforward way, using a static, equal-weighting scheme,” says Mehdi Alighanbari. “We wondered if we could do better with a more sophisticated and dynamic adjustment of factors over time.” Alighanbar and Chin Ping Chia , both of MSCI , compared the risk and return characteristics of five static and three dynamic weighting strategies to a base case, equal-weighted strategy over a period of 36 years.The authors found that, historically, a simple diversification strategy has outperformed other more complex strategies (especially after accounting for turnover costs.)