Fundamental indexing strategies attempt to form benchmarks based on fundamental factors such as book value, dividends or earnings rather than market capitalization. Proponents claim that the fundamentals provide a less biased estimate of a security’s fair value, and thus explain the value premium. Detractors claim that the strategies are simply “value investing in a shiny new wrapper.”
In the January/February 2008 Financial Analysts Journal,Â Kaplan argues both fundamental and market-cap weightings provide valuable information, and argues in favor of approaches that combine both.
Posted on 4th April 2008
Under: Active Management, Fundamental Analysis, Investing in Stocks, Investment Returns, Passive Management, Portfolio Management, Quantitative Analysis, Valuation | No Comments »