NEW YORK, NY--(Marketwired - Aug 8, 2013) -   The Journal of Portfolio Management has made freely available a timely article, called Diversifying the Diversifiers and Tracking the Tracking Error: Outperforming Cap-Weighted Indices with Limited Risk of Underperformance

The co-authors investigate index construction risk and propose methods to reduce the short-term downside risk of quantitative or fundamental weighting schemes. Download the full article by visiting us online.

Practitioners are increasingly turning to these alternative weighting schemes because they outperform market cap weighting over the long term. However, they are unwittingly taking on substantial downside risk relative to cap-weighted indices, the paper shows. Please visit Institutional Investor Journals to download the full article and to read more published content from these authors.

Read the article to:

1) Learn how to diversify model risk and control risk relative to cap-weighted indices
2) Understand the importance of combining diversification approaches -- MSR and GMV
3) Uncover how to build improved equity benchmarks

In an accompanying, related video interview, Co-author Lionel Martellini -- Professor of Finance at EDHEC Business School and Scientific Director at EDHEC-Risk Institute -- cautions that market participants mistakenly believe risk management equates to risk diversification. Lionel warns that a seemingly well-diversified portfolio actually may contain very concentrated risk exposures. He gives some practical advice on how practitioners should approach portfolio risk management.

The article, Diversifying the Diversifiers and Tracking the Tracking Error, was co-written by Noël Amenc, Felix Goltz and Ashish Lodh, also with EDHEC Business School and EDHEC-Risk Institute.

For more information about Institutional Investor Journals or The Journal of Portfolio Management, please contact Ashley Posner at or +1 (212) 224-3026.

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