Meaning – Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional market capitalization-based indices. Smart beta emphasizes capturing investment factors or market inefficiencies in a rules-based and transparent way. The increased popularity of smart beta is linked to a desire for portfolio risk management and diversification along factor dimensions, as well as seeking to enhance risk-adjusted returns above cap-weighted indices.
The goal of smart beta is to obtain alpha, lower risk or increase diversification at a cost lower than traditional active management and marginally higher than straight index investing. It seeks the best construction of an optimally diversified portfolio. In effect, smart beta is a combination of efficient-market hypothesis and value investing.
Meaning – It is the expectation that markets and the economy will be supported by fiscal policy stimulus measures.
Fiscal policy stimulus, including reductions in taxes and increased government spending, are generally aimed at giving a direct boost to the real economy, although financial markets should also expect the indirect benefits of strengthening economic growth. A renewed support for Keynesian-style fiscal stimulus measures have lead to expectations that governments around the world will use their spending power to boost the economy, and in turn, help support asset prices.
Meaning – A market that is believed to have the potential to make a strong move in one direction after being pushed in the opposite direction.
Coiled markets often arise when the market has been held down artificially. The idea is that if a market should be headed in one direction based on its fundamentals but is pushed in the other direction, it will eventually make a strong move in the original fundamental direction. This coiled move will often be more substantial than what might have been the case if it had gone in the expected direction, to begin with. This happens in commodities markets, such as gold and silver.