Robert D Arnott, Jason C Hsu, John M West

The Fundamental Index

A Better Way to Invest

• Gebundenes Buch

Produktbeschreibung

The Fundamental Index(R) approach is a straightforward concept that weights companies in an indexed portfolio by their current economic scale, rather than by the value of their shares outstanding. In effect, this method shifts the frame of reference for investing from a market-centric view of the world--weighting companies according to how large the market thinks a company will become in the future, and prepays for today--to an economy-centric view--mirroring the current look of the economy. The authors demonstrate that this puts you in a better position to capture considerable profits along the way. Author Rob Arnott and his colleagues at his innovative investment firm, Research Affiliates, spent several years developing the Fundamental Index methodology. In just over three years, the idea has attracted over $20 billion of investment capital from some of the largest and most sophisticated institutional investors in the world. Now, with this book, Arnott and his coauthors Jason Hsu and John West explore the nuances of this approach, its historical roots, and its many practical applications. The Fundamental Index examines how this new twist on indexing can overcome the structural return drag created by traditional capitalization-based indexing strategies--which systematically overweight overpriced securities and underweight underpriced securities--and in so doing, enhance the performance of your portfolio. Throughout these pages, Arnott and his colleagues outline this breakthrough strategy and explain how it can be used to improve investment returns, typically at lower risk and lower cost than most conventional investments. In addition to discussing the powerful long-term performance of this strategy, The Fundamental Index also addresses an array of additional advantages associated with the Fundamental Index approach. You'll discover how it allows for more flexibility in your asset allocation decisions and learn how it can be particularly useful when dealing with inefficient market categories such as small companies and emerging markets. Best of all, you'll see how well Fundamental Index portfolios perform when excess returns are needed most--during market and economic downturns. In the years ahead, the Fundamental Index approach will become an important part of the indexing community and an essential alternative for those who are disappointed with the hollow promises of active management and frustrated with the market bubbles that traditional index funds pull us into. This innovative and accessible strategy will give experienced and aspiring investors--and their advisors--a new tool to achieve better returns in a variety of markets and conditions. Pick up this book today and discover how the Fundamental Index strategy can work for you.

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Produktdetails

• Verlag: Wiley
• Seitenzahl: 336
• Erscheinungstermin: 1. April 2008
• Englisch
• Abmessung: 235mm x 157mm x 23mm
• Gewicht: 640g
• ISBN-13: 9780470277843
• ISBN-10: 047027784X
• Artikelnr.: 23327130

Autorenporträt

ROBERT D. ARNOTT is a leading industry thinker and researcher who served as the editor of the Financial Analysts Journal from 2002-2006 and who has authored over 100 articles for journals such as the Financial Analysts Journal, the Journal of Portfolio Management, and the Harvard Business Review. Arnott serves as Chairman of Research Affiliates, LLC, a global leader in innovative investing and asset allocation strategies. Founded in 2002, Research Affiliates distributes investment products in partnerships with leading financial institutions including PIMCO, PowerShares, Charles Schwab, Nomura Asset Management, and FTSE, to name only a few. JASON C. HSU, PHD, is Managing Director, responsible for Research and Investment Management, at Research Affiliates, LLC. He is also a Professor in Finance at the Anderson School of Business at UCLA. JOHN M. WEST is Associate Director and Product Specialist at Research Affiliates, LLC. Previously, he was vice president and senior consultant at Wurts & Associates, where he managed the firm's overall research effort.

Inhaltsangabe

Foreword.
Preface.
Chapter 1. Efficient Indexing for an Inefficient Market.
Evidence of Market Efficiency.
The Case for Indexing.
Evidence of Market Inefficiency.
Conclusion.
Chapter 2. Origins of the Fundamental Index Concept.
The Origins of Research Affiliates Fundamental Index (RAFI).
A Series of Aha! Moments
Research Affiliates Fundamental Index.
Fundamental Index Performance.
Concluding Thoughts: A Better Way to Invest.
Chapter 3. Investors Greatest Errors.
Negative Alpha.
Practicing What We Preach.
Conclusion.
Chapter 4. The Virtues of Index Funds.
The Appeal of Equity Investing.
Equity Investing Choices.
The One Guarantee in Investments-Costs Matter.
Index Fund Advantages.
Avoiding the Performance Game.
Concluding Point.
Chapter 5. The Index Fund's Achilles Heel.
Market Efficiency: Two Interpretations.
Constructing a Well-Functioning Index.
The Achilles Heel of Cap-Weighting.
The Problems with Equal Weighting.
Concluding Thoughts.
Chapter 6. A Fundamental(ly) Better Index.
Building the Fundamental Index.
Adjustments for non-dividend-paying companies.
Why Multiple Measures of Company Size?
Advantages of a Composite Measure.
An Index of the Broad Economy.
Capacity and Liquidity.
Reconstituting the Fundamental Index: Keeping Turnover Low.
Concluding Comments.
Chapter 7. Fundamental Index Performance in U.S. Stocks.
RAFI US Large Company Performance.
Digging Deeper across Market Cycles.
Digging Deeper into Different Time Periods.
An Equal Comparison: Fundamental Index vs. Equal Weighting.
Out-of-Sample Results: Small Companies.
Using the Fundamental Index with Style: Growth and Value Applications.
Narrowing the Focus: NASDAQ.
Narrowing the Focus: REITs.
Narrowing the Focus: Sector Performance.
Extending the Analysis Back in Time.
Conclusion.
Chapter 8. Beyond Borders: Fundamental Index Performance in Global Markets.
Fundamental Index Performance in Global Markets.
Multicountry Portfolios.
Emerging Markets.
Consistency Counts.
Concluding Comments: Lessons Learned From the Global Markets.
Chapter 9. Has Theory Led the Profession Astray?
Will the Real Active Strategy Please Step Forward?
The Origins of Cap Weighting.
Apparent Validation of Cap Weighting by Theory.
Forty Years Later: Empirical Results of the CAPM.
Ockham's Razor Applied.
Concluding Comments: Theory and the Profession.
Chapter10. The Basic Criticism: Our Style and Size Tilt.
Merely a Value Tilt.
Small-Cap Bias.
Fama and French Factors.
Some Big Surprises in Small Companies.
Conclusion.
Chapter 11. Other Common Critiques: Hits and Misses.
Mining the Data?
Costs.
Is It an Index?
Do We Know Which Stocks Are Overvalued?
How Long Can It Last?
Conclusion.
Chapter 12. Why Trust the Fundamental Index Concept?
Stock Logic.
The Present vs. the Future: How Often Is Wall Street Right?
Why Does Wall Street Get It Wrong?
Dynamic Style and Size Exposures: When Do We Want Value and Small Cap?
Show Me the Numbers.
Fundamental Index Strategy vs. the Crystal Ball.
Does the Fundamental Index Concept work in Bonds?
Conclusion.
Chapter 13. The Future for the Fundamental Index: Secular Market
Considerations.
What Can We (Rationally) Expect from Our Investments?
Forecasting Bond Returns.
Forecasting Stock Returns.
The Fundamental Index Strategy in a Low-Return Environment.
The Outlook for Pricing Errors.
Could Pricing Errors Actually Increase?
Conclusion.
Chapter 14. Using the Fundamental Index.
Asset Allocation and the Fundamental Index Strategy.
Should We Change Our Benchmark?
Diversifying the Passive Allocation.
Different Markets, Different Investors, Different Needs.
Conclusion.
Appendix.
Notes.
References.
Index.