Fundamental indices are challenging the traditional capitalisation-weighted equity indices, which it is claimed overweight overpriced stocks and underweight undervalued stocks. These inefficiencies lead to a drag on returns of about 2% a year in developed markets and more in less efficient markets, according to research by Research Affiliates and BetaShares. BetaShares offers ETFs in Australia based these methodologies.
The full White Paper, What Makes the Fundamental Index Methodology Work?, is available here.
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