We challenge the common view that smart beta strategies and factor tilts are equivalent. Initially, the term “smart beta” referred to strategies that broke the link between the price of a stock and its weight in the portfolio or index. Capitalization weighting does not do that — neither...

In our paper — “How Can ‘Smart Beta' Go Horribly Wrong?” — we show, using U.S. data, that the relative valuation of a strategy (in comparison with its own historical norms) is correlated with the strategy's subsequent return at a five-year horizon. The high past performance of many of...

In a series of papers we published in 2016, we show that relative valuations predict subsequent returns for both factors and smart beta strategies in exactly the same way price matters in stock selection and asset allocation. To many, one surprising revelation in that series is that a number of...