I made a joke on Twitter last week about starting the "Better Backtesting Bureau," but with 200+ likes, it seems to have resonated...
The more I think about it, though, the more I think it's not such a horrible idea.
There are hundreds – if not thousands – of "smart-beta" indices with publicly disclosed methodologies. Nevertheless, actually understanding what drives the returns of the strategy can be rather complicated.
Value, for example, is never just value. There are a lot of decisions that need to be made in constructing a value portfolio.
The tyranny of these small details was the basis for a recent interview I did with Validea for their Five Questions series as well as this week's commentary.
This week, I take a deep dive into one such strategy – the Barclays Shiller CAPE US Sector index – which is one of the few value strategies that has actually done well in recent years.
What I find, though, is that the success may have nothing to do with value at all. (PDF)
🎧 LISTEN: Flirting with Models – Katherine Glass-Hardenbergh – All About Alternative Data (S2E9)
Read of the Week
→ FACTOR MANAGEMENT: "The value-added induced by factor management via short-term momentum is a robust empirical phenomenon that survives transaction costs and carries over to multi-factor portfolios." Momentum-Managed Equity Factors
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