Goldman Sachs AM chairman Jim O'Neill has proposed an alternative 'rules-based investing approach' he believes can produce lower risk equity market returns.
The strategy is based on the belief higher beta stocks produce poorer risk-adjusted returns than lower beta stocks, and that market cap-weighted indices are at risk of thematic bubbles. The approach aims to eliminate the riskiest stocks from its investment universe by sorting stocks by realised five-year beta, and ignores market capitalisation-based valuations. O'Neill says market cap-focused benchmarks tend to "overweight what is overvalued and underweight what is undervalued", as well as lagging broader economic trends. O'Neill's third rule involves factoring in GDP into determin...
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