Towards the Design of Efficient Equity Benchmarks

le 21 novembre 2011

Asset management is the art and science of designing investment solutions that match investors’ needs.

For more than fifty years, the industry has focused on delivering alpha through security selection as the main source of added value, based on the assumption that market-cap-weighted indices were efficient portfolios. This single-minded focus, which has not fared well in recent market turbulence, has, to some extent, kept the industry from looking into a more significant source of added value: beta and risk management.

In the wake of these recent crises, and given the intrinsic difficulty of generating alpha, the question of the value added by both active and passive managers has been raised with heightened intensity. Academic and industry research has offered convincing empirical evidence that market-cap-weighted indices post poor risk-adjusted performance, whereas other studies have questioned the validity of utilising market cap as a proxy for company size and economic influence. The combination of these empirical and theoretical developments has significantly weakened the case for market-cap-weighted indices, and slowly but surely consensus on the inadequacy of market cap-weighted-indices as investment vehicles is emerging.

This fierce attack on cap-weighted indices, which are neither representative nor efficient, has, however, left investors with a void. Although there have been proposals for alternative weighting schemes, the emergence of which blurs the traditional divide between active and passive equity portfolio management, it is not yet clear which alternatives investors should prefer. Drawing on the expertise developed at EDHEC-Risk Institute, this course equips participants with both the technical and conceptual tools that will allow them to better understand the limits and benefits of traditional and alternative equity benchmarks, and provides them with an introduction to the efficient indices developed by EDHEC-Risk.

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Type :: Séminaire
Contact :: Séverine Anjubault
severine.anjubault@edhec-risk.com
Lieu(x) :: Dubaï
Le Meridien Dubai
Airport Road
PO Box 10001
Dubai
United Arab Emirates

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Towards the Design of Efficient Equity Benchmarks