Top Recent Papers on Factor Anomalies
Axioma and Robeco seem to agree that focusing on a single factor portfolio (with unintended exposures to other factors) is a mistake, and efficient factor investing may necessitate a multi-factor perspective. Additionally, Research Affiliates describes common misconceptions about factor investing that involve performance expectations, diversification, and risk management within factor portfolios.
The papers listed below also cover specific factor anomalies, factor integration, and an up-to-date census of all published factors within the factor zoo.
As investment managers continue to consider ESG criteria a fundamental part of their investment process, understanding how factors and ESG relate to each other has become increasingly important. Common misconceptions about ESG and factors should be challenged.
For compliance reasons, this paper is only accessible in the United States
As a part of its 9th annual US ETF Study, Greenwich Associates interviewed 181 institutional investors on the linkage between the utilisation of smart beta strategies and the demand for ETFs. Around one-third of investors surveyed plan on increasing allocations to factor-based or smart beta ETFs over the next year.
Robeco unveils the sub-optimal nature of single-factor portfolios, and in the process of doing so, explains why efficient factor investing necessitates a multi-factor perspective.
Similarly, Axioma sets out to answer the fundamental question - What, exactly is a factor? - by focusing in on the concept of factor purity.
In this paper, Research Affiliates looks at factor strategy design, finding that the method of implementation has a significant effect on performance in a multi-factor portfolio.
For compliance reasons, this paper is only accessible in the UK & Europe
The authors provide an overview of factor investing in fixed income markets, then describe a particular portfolio construction methodology that may have the potential to minimize some of the pitfalls of factor integration while preserving the benefits of factor utilisation.
The authors look at tax loss harvesting within an indexing strategy, as well as six factor tilts for US equities over a 23 year period.
Just how universal is the low volatility anomaly? It seems to be fairly ubiquitous. S&P Dow Jones Indices examines this anomaly in the S&P 500 as well as other markets.
The authors argue that the philosophy behind factor investing is compromised by a number of problems that investors often fail to understand. For this reason, it has failed to live up to expectations.
In this paper, Two Sigma proposes a methodology using historical data to quantify the return premia for major asset-class based factors.
The authors of this SSRN paper have documented over 400 factors that have been published in top journals. They look at p-hacking within the factor zoo, also providing a census of published factors through Jan 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.