RAFI® replication: Easier done than said?

Paskalis Glabadanidis, Ivan Obaydin and Ralf Zurbruegg ()
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Ralf Zurbruegg: University of Adelaide Business School

Journal of Asset Management, 2012, vol. 13, issue 3, No 6, 210-225

Abstract: Abstract We investigate whether adding fundamental indices to a portfolio provides increased diversification benefits. Our results show that equity investors who care only about portfolio mean and variance will benefit from including a fundamental index in their portfolios. This benefit is especially pronounced during periods of average stock market volatility. We also find that investors can construct a do-it-yourself buy-and-hold replicating portfolio that frequently outperforms the Research Affiliates Fundamental Index®(RAFI®), exchange traded fund out-of-sample.

Keywords: fundamental indexes; portfolio diversification; mean-variance spanning (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1057/jam.2012.7

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