To the extent that earnings and book values are some of the factors used to weight stocks in the portfolio, FI will systematically overweight “value” stocks and underweight “growth” stocks. Moreover, to the extent that FI attempts to underweight stocks with (temporarily) high market capitalizations, there will be a tendency for an FI portfolio to contain smaller-capitalization stocks compared with a cap-weighted index. According to Eugene Fama and Kenneth French (2007), RAFI is a “triumph of marketing, and not of new ideas.” It’s simply a “repackaging” of ideas that have been in the academic literature for.
