Smart beta strategies theoretical vs real world alpha

Abstract

There have been significant studies and evidence that Smart Beta strategies can outperform the market capitalization-based indices in the long run. Smart Beta investment offers the investors the benefits of passive strategy (not frequent rebalancing of portfolio) combined with the advantages of active approaches. In this study, we would be trying to use smart beta strategies to make portfolios to outperform the market capitalization-based indices. We will be focusing primarily on the Indian market and examine them from 2003 to 2017. In the first phase, we will be using factors like momentum, volatility, dividend yield, growth, etc. and identify whether we can outperform the Indian market indices. In the second phase, we will have tried to analyse impact cost and drawdown for different smart beta portfolios.