A factor is an attribute of a stock or security that explains the security’s performance (“value” and “momentum” are examples). The underlying research – recognized with two Nobel Prizes (1990, 2013) – demonstrated that a security’s return is determined by the set of risk factors that it is exposed to, rather than its standalone risk (as measured by its volatility).
Out of the hundreds of factors that have been considered in academic research, a small subset have been demonstrated to be robust across time, across geographies, and – in some instances – across asset classes. Smart Beta considers five of these factors: market beta, dividend yield, momentum, volatility, and profitability.
For more details, see our Smart Beta White Paper.
This communication has been prepared solely for informational purposes only. Nothing in this communication should be construed as an offer, recommendation, or solicitation to buy or sell any security or a financial product. Any links provided to other server sites are offered as a matter of convenience and are not intended to imply that Wealthfront or its affiliates endorses, sponsors, promotes and/or is affiliated with the owners of or participants in those sites, or endorses any information contained on those sites, unless expressly stated otherwise.
Wealthfront offers a free software-based financial advice engine that delivers automated financial planning tools to help users achieve better outcomes. Investment management and advisory services are provided by Wealthfront Advisers LLC, an SEC registered investment adviser, and brokerage related products are provided by Wealthfront Brokerage LLC, a member of FINRA/SIPC.
Wealthfront, Wealthfront Advisers and Wealthfront Brokerage are wholly owned subsidiaries of Wealthfront Corporation.
© 2020 Wealthfront Corporation. All rights reserved.