Fundamental wins over cap weighted indexing

Rob Arnott, chairman of Research Affiliates, which is famous for bringing fundamental indexing to the investment world, on why this method is superior to traditional cap weighted indexing. His contrarian method which 'sells whatever is most newly beloved and buys whatever is most newly feared and loathed' is gaining admirers. He says it has delivered 2-3 per cent value add in the developed markets and 3-4 per cent in small companies and emerging markets.