Financial Education

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,  Kaplan argues both fundamental and market-cap weightings provide valuable information, and argues in favor of approaches that combine both.

Written by Richard Wilson in his Hedge Fund Blog

Kurtosis Definition: In probability theory and statistics, kurtosis from the Greek word kurtos, meaning bulging is a measure of the “peakedness” of the probability distribution of a real-valued random variable. Higher kurtosis means more of the variance is due to infrequent extreme deviations, as opposed to frequent modestly-sized deviations.

The blue distribution exhibits higher kurtosis.