@article {Peltom{\"a}ki96, author = {Jarkko Peltom{\"a}ki}, title = {Nonlinear Exposures of Fundamental Index Returns}, volume = {13}, number = {3}, pages = {96--106}, year = {2010}, doi = {10.3905/jwm.2010.13.3.096}, publisher = {Institutional Investor Journals Umbrella}, abstract = {The Research Affiliates Index (RAFI) methodology is a fundamental weighting strategy which has rapidly built up its popularity and investors can invest in the strategy using Exchange Traded Funds (ETFs). In this article, these investment vehicles are investigated with a consideration of their nonlinear exposure to their benchmark factors. The results provide some evidence for out-performance of the RAFI methodology. Further, portfolios following the strategy may exhibit some spurious market timing characteristics which can be explained as an omitted variable bias in the analysis. The evidence for omitted variables after adjusting for book-to-market anomaly implies that fundamental indexation is not just about value bias.TOPICS: Exchange-traded funds and applications, fundamental equity analysis, performance measurement}, issn = {1534-7524}, URL = {https://jwm.pm-research.com/content/13/3/96}, eprint = {https://jwm.pm-research.com/content/13/3/96.full.pdf}, journal = {The Journal of Wealth Management} }