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Factor Investing: The Essentials

Top Papers on The Essentials of Factor Investing

The first item listed below is not only a primer on the essentials of factor investing, but also a learning module for investment professionals seeking credit for continuing professional development. Studying Robeco's nine factor investing modules and taking a short quiz afterwards is a quick way to garner two credit hours that are compliant with many professional designations.

We've included several other papers on factor investing essentials, historical factor returns, and factor-related studies, plus some of the most recent factor investing papers from the last month or so.

factor essentials


Learning the Essentials of Factor Investing (Robeco, 2019)

Robeco explains the essentials of factor investing in the form of a learning module consisting of nine easily digestible sections that can also be used to earn CPD credits.

An Introduction to Factor Investing (Savvy Investor)

This special report, authored by Savvy Investor, is designed as a primer for investors wanting a concise introduction to factor investing, which explains the five key equity market factors and how they are deployed by some of the main factor investing managers.

Foundations in Factors (Northern Trust, 2019)

Northern Trust discusses the foundations of style factors. Because these style factors are also subject to cyclicality, they also recommend strategies to minimize this risk.

How, when, and why factors work (O'Shaughnessy AM, 2018)

The authors present a unified framework that they've developed to explain how factors work. They discuss the convergent and divergent processes that are associated with the value and momentum factors.

Factor Report (Lazard AM, Sep 2019)

Lazard Asset Management reviews growth, value, sentiment, quality, and risk factor returns across multiple equity markets in a report that's updated on a monthly basis.

Do Factor Premia Vary Over Time? A Century of Evidence (AQR Capital Management, 2019)

AQR conducts a comprehensive study of factor timing, examining factor premia (value, carry, momentum, defensive) for six asset classes and over a century of return data.

Do Yield Curve Inversions Impact Factor Performance? (Axioma blog, 2019)

Axioma explores whether style factors behave differently after an inversion of the yield curve, drawing upon some of their previously published research.

The Impact of Crowding in Alternative Risk Premia Investing (Financial Analysts Journal, 2019)

Crowding is a big concern for ARP strategies. This paper looks at the performance of convergence premia versus divergence premia during periods of large investor inflows.

The Risks of Deviating from Academically-Validated Factors (Scientific Beta, 2019)

Factor investing approaches have risen in popularity, but many of the factor definitions used within new investment products are far removed from the standard (academically proven) factors. Some methodologies may result in p-hacking and the use of irrelevant factors.

What Is a Factor? The Impact of the Long-Only Constraint (Axioma, 2019)

A long-only constraint implies that a manager can't short securities within their portfolio, yet these returns are often measured against a factor portfolio that can. This difference could have a substantial impact.

A smoother ride? Looking at factor-based asset allocation (MSCI blog, 2019)

For compliance reasons, this paper is only accessible in certain geographies

MSCI investigates a factor-based approach to asset allocation as opposed to a traditional approach, evaluating the pros and cons of utilising factors for this purpose.

Risk & Reward 2Q 2019: A factor-based approach to diversifying oil exposure (Invesco)

Among other things, this 32-page issue of Risk & Reward examines how to take a factor-based approach to diversifying oil exposure.

Integrating Low-Carbon and Factor Strategies in Asia (S&P Dow Jones Indices, 2019)

This paper from S&P Dow Jones Indices looks at how low-carbon screening impacts market-cap-weighted portfolios and factor portfolios (value, quality, momentum, and low vol) across seven Asian markets.

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