Special Report: Alpha ETFs Come Of Age

Michael Johnston — Tue, 01 Sep 2009 09:00:55 +0000

In the summer of 1992, Eugene Fama and Kenneth French published “The Cross-Section of Expected Stock Returns” in The Journal of Finance, a groundbreaking analysis that prompted financial presses to run headlines declaring “beta is dead.” While the death sentence may have been a bit severe, it struck a significant blow to a widely-accepted and longstanding financial concept, causing academics and investors to reconsider tenets they once took for granted. In recent decades, a collection of academic studies, disillusioned investors, and financial innovations have contributed to a similar prognosis for beta’s Greek neighbor, alpha. The idea that was hatched by Brinson and Hood and supported by the likes of Ibbotson and Kaplan and Barras and Scaillet was fueled by years of investor frustration. Following the introduction and rapid rise in the popularity of indexing and ETFs, it seemed that what started out as a scholarly whisper had grown into a [...]

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Special Report: Alpha ETFs Come Of Age

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