Decomposing fundamental indexation?

Decomposing fundamental indexation?

22-03-2017 | From the field

Previous studies have shown that the value added by fundamental indexation strategies is entirely driven by their implicit exposure to the classic value premium. This article* compares fundamental index strategies with strategies that start with the market index and then tilt towards value stocks.

  • David Blitz
    Chief Researcher

The authors find that the tilted strategies involve similar returns, volatility and turnover to the corresponding fundamental index, but that they have higher information ratios and lower tracking error. Using the same methodology, they go on to show that a modified index strategy that incorporates multiple distinct quantitative factors generates much higher information ratios than the fundamental index strategy, with similar turnover.

We agree with the conclusions of this study: fundamental indexation is a value strategy that is designed for its simplicity and appeal, but it is not the most efficient way of capturing the value premium.

Stay informed on Quant investing with monthly mail updates
Stay informed on Quant investing with monthly mail updates
From the field
From the field

Our researchers publish many whitepapers based on their own empirical studies; they also follow quantitative research done by others.

Read all articles


The information contained in the website is solely intended for professional investors. Some funds shown on this website fall outside the scope of the Dutch Act on the Financial Supervision (Wet op het financieel toezicht) and therefore do not (need to) have a license from the Authority for the Financial Markets (AFM).

The funds shown on this website may not be available in your country. Please select your country website (top right corner) to view the products that are available in your country.

Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports, which can be all be obtained free of charge at this website and at the Robeco offices in each country where Robeco has a presence.

By clicking Proceed I confirm that I am a professional investor and that I have read, understood and accept the terms of use for this website.