RT Journal Article
SR Electronic
T1 Practical Applications of Smart Beta Efficiency versus Investability: <em>Introducing the Cost-Adjusted Factor Efficiency Ratio</em>
JF Practical Applications
FD Institutional Investor Journals
SP 1
OP 3
DO 10.3905/pa.5.4.263
VO 5
IS 4
A1 Daniel Ung
YR 2018
UL https://pm-research.com/content/5/4/1.9.abstract
AB With the rapid proliferation of equity smart beta products that seemingly track the same risk factors, it’s increasingly difficult for investors to select those most appropriate to their needs. In Smart Beta Efficiency versus Investability: Introducing the Cost-Adjusted Factor Efficiency Ratio, author Daniel Ung (then S&amp;P Dow Jones, now State Street Global Advisors) introduces a new, practical metric: the Cost-Adjusted Factor Efficiency Ratio (Ca-FER). His work builds on previous research by Hunstad and Dekhayser [2015], which established the Factor Efficiency Ratio as a way to measure the “factor purity” of different strategies, and incorporates a vital additional element: the cost of implementation.