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.
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.
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.
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.
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.
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.
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.
Axioma explores whether style factors behave differently after an inversion of the yield curve, drawing upon some of their previously published research.
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.
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.
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.
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.
Among other things, this 32-page issue of Risk & Reward examines how to take a factor-based approach to diversifying oil exposure.
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.