Tell us about the NYSE Zebra Edge Index.
You know, all of the things are connected or combined together for me because all of my life I’ve been putting together academic thought, and with it its implementation into practical investments. And so we developed the NYSE Zebra Edge Indices for the express purpose of capturing ways to get higher returns with lower volatility.

How does your recent research into “popularity” relate to your stocks and bonds research?
I’ve done a lot of work over the years on stocks, bonds, and bills of inflation – or SBBI – studying the risk and return relationships, and how the long term equity markets have performed.

Popularity, actually, adds a whole new dimension to this, because, in the case of popularity, we are looking at ways to actually get higher returns with lower volatility. So this is a great way to mix the two lines of work for me.

Tell us about popularity. Can you define that for us?
Popularity is avoiding the hot stocks and actually considering those cool stocks. The problem with those hot stocks is they’re too popular. And being too popular, that means, that we get too excited about them and they end up being too overpriced, really.

How do you measure popularity?
We measure popularity by looking at how much interest, how much tangible interest is in a stock. And you can see this by the trading volume. Stocks that trade too much are too popular and tend to be too highly priced.

Does popularity apply to all markets, even international markets?
Popularity applies to all types of markets – many types of stock and bond markets, real estate, anything. Anything that gets too popular – that people get too excited about – that may end up with too high of a price. We’ve specifically looked at a lot of international stock markets and I have to say that in almost every country that we looked at, the stocks that have a higher trading volume actually have lower returns.

How does it feel to be here at the New York Stock Exchange?
It's really exciting to be on the floor of the New York Stock Exchange where I’ll be ringing the Bell, and it's especially interesting because the ringing of the Bell will be connected with our new product launch, the NYSE Zebra Edge Indices.

What do you think increased interest of “Smart Beta” strategies?
Investors are investing in smart beta to capture long-term premiums and the way they're doing that is looking at existing traditional indices that are cap-weighted, reweighting based upon the factor that they want to identify or they want to get the return from. The problem is that the factors become popular or the premiums become popular, and people invest in what’s popular.

The key to success in investing in these types of strategies is to invest in the less popular premiums—typically they’re underpriced.

Why are you excited to be here today?
The NYSE Zebra Edge Equity Indices are designed to capture the popularity premium while maintaining a low volatility profile. We’re very excited about doing these as it’s the first time we’re able to put together Roger’s research in these types of indices for investors to consider.

We at Zebra Capital are very excited to be working with the New York Stock Exchange creating these indices, which will hopefully provide investors with a great opportunity.