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market-neutral and low-beta ETFs - use for Q Fund portfolio?
Grant Kiehne
posted May 23, 2015

It turns out that there are such market-neutral beasts as the Q Fund needs, in the form of ETFs. For example, see:

http://www.quant-shares.com/

So, maybe one could find all of the market-neutral and low-beta ETFs out there, and the create a strategy around them on Q, to see if more return could be eked out of them taken as a whole. One could still go long and short, but at least the base securities wouldn't be strongly correlated with the market. Let somebody else do all of the heavy lifting to reduce the correlation to the market.

Any thoughts?

1 response
Mike Timmons
May 24, 2015

Here is a white paper and article on a 'Betting Against Beta' strategy which suggests that betting against Beta returns a better risk adjusted return than betting on beta. In short they suggest the market overpays for Beta.

From the article below, "...betting on beta would be a better strategy, if you care only about absolute returns, and not about their risk-efficiency."

http://seekingalpha.com/article/2600845-betting-against-beta

The problem I see in this article is that "Low Beta" is anything below 1.0. I believe 'low Beta' according to Q is 'much less' than 1.0. Some concerns and good discussion in the article.

http://www.econ.yale.edu/~af227/ Original Betting Against Beta and other papers on risk vs beta vs leverage.

More grist for the mill...

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