Opinion
Alpha, Beta, and Beyond
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Given that this strategy can be applied to stocks, bonds, currencies, and many other asset classes, smart beta could be the future of asset management.
By Nouriel Roubini
Even in normal times, individual and institutional investors alike have a hard time figuring out where to invest and in what. Should one invest more in advanced or emerging economies? And which ones? How does one decide when, and in what way, to rebalance one’s portfolio?
Obviously, these choices become harder still in abnormal times, when major global changes occur and central banks follow unconventional policies. But a new, low-cost approach promises to ease the challenge confronting investors in normal and abnormal times alike.
In the asset management industry, there have traditionally been two types of investment strategies: passive and active. The passive approach includes investment in indices that track specific benchmarks, say, the S&P 500 for the United States or an index of advanced economies or emerging-market equities. In effect, one buys the index of the market.
Read full article as published in Project Syndicate
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Nouriel Roubini is a Professor of Economics and International Business and the Robert Stansky Research Faculty Fellow.
Obviously, these choices become harder still in abnormal times, when major global changes occur and central banks follow unconventional policies. But a new, low-cost approach promises to ease the challenge confronting investors in normal and abnormal times alike.
In the asset management industry, there have traditionally been two types of investment strategies: passive and active. The passive approach includes investment in indices that track specific benchmarks, say, the S&P 500 for the United States or an index of advanced economies or emerging-market equities. In effect, one buys the index of the market.
Read full article as published in Project Syndicate
___
Nouriel Roubini is a Professor of Economics and International Business and the Robert Stansky Research Faculty Fellow.