Dumb Beta

Beta is a measure of how closely the movement of an individual stock tracks the movement of the overall market. If a stock has a beta of 1 that means that it moves exactly as the market moves. A beta of 0.5 would mean that the stock moves with the market about 50% of the time. Index funds are designed to have a beta of 1, but, humans think that they are smarter in the market and can build an index fund that outperforms the indexes. The industry calls these funds smart beta funds. They use the...