NEW YORK, NY — (Marketwired) — 08/08/13 — has made freely available a timely article, called .
The co-authors investigate index construction risk and propose methods to reduce the short-term downside risk of quantitative or fundamental weighting schemes. Download the full article by online.
Practitioners are increasingly turning to these alternative weighting schemes because they outperform market cap weighting over the long term. However, they are unwittingly taking on substantial downside risk relative to cap-weighted indices, the paper shows. Please visit to the full article and to read more published content from these authors.
1) Learn how to diversify model risk and control risk relative to cap-weighted indices
2) Understand the importance of combining diversification approaches — MSR and GMV
3) Uncover how to build improved equity benchmarks
In an accompanying, related interview, Co-author — Professor of Finance at and Scientific Director at — cautions that market participants mistakenly believe risk management equates to risk diversification. Lionel warns that a seemingly well-diversified portfolio actually may contain very concentrated exposures. He gives some practical advice on how practitioners should approach risk management.
The article, and Tracking the Tracking Error, was co-written by Noël Amenc, Felix Goltz and Ashish Lodh, also with EDHEC Business School and EDHEC-Risk Institute.
For more information about or , please contact Ashley Posner at or +1 (212) 224-3026.
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