Year of Graduation
Implementation of Smart Beta Strategies
Smart Beta, also known as Strategic Beta, Alternative Beta and factor investment is a set of investment strategies based on alternative rules for determining weights in place of the traditional weighting by capitalization. Such strategies allow to gain an advantage over market imperfections that are inaccessible to traditional indices, while being cheaper than active management, since it does not require the daily decision-making of the portfolio manager but recalculates the weights according to pre-established rules. The main systematic factors are value, small size, low volatility, quality, momentum and high dividend yield. The purpose of this work is to conduct a comprehensive study of the main stages in the formation and application of factor investing strategies in the stock market. In this paper, the main stages of the creation, evaluation of risk-return profile and investablity of investment strategies will be tested using the example of an anomaly of low volatility on the Russian stock market. For this purpose, 5 portfolios were formed, and then tested on historical data from 2012 to 2018. 3 portfolios showed positive excess returns adjusted for risk (information ratio, Sharpe and Sortino ratio), as well as low sensitivity to market risk, calculated in the CAPM regression model.