Factor investing is an investment approach that involves targeting quantifiable firm characteristics or “factors” that can explain differences in stock returns. Security characteristics that may be included in a factor-based approach include size, low-volatility, value, momentum, asset growth, profitability, leverage, term and carry.
A factor-based investment strategy involves tilting investment portfolios towards or away from specific factors in an attempt to generate long-term investment returns in excess of benchmarks. Proponents claim this approach is quantitative and based on observable data, such as stock prices and financial information, rather than on opinion or speculation. Factor premiums are also documented in corporate bonds and across all major asset classes including currencies, government bonds, equity indices, and commodities.
Critics of factor investing argue the concept has flaws, such as relying heavily on data mining that does not necessarily translate to real-world scenarios.
A factor-based investment strategy involves tilting investment portfolios towards or away from specific factors in an attempt to generate long-term investment returns in excess of benchmarks. Proponents claim this approach is quantitative and based on observable data, such as stock prices and financial information, rather than on opinion or speculation. Factor premiums are also documented in corporate bonds and across all major asset classes including currencies, government bonds, equity indices, and commodities.
Critics of factor investing argue the concept has flaws, such as relying heavily on data mining that does not necessarily translate to real-world scenarios.
Factor investing is an investment approach that involves targeting quantifiable firm characteristics or “factors” that can explain differences in stock returns. Security characteristics that may be included in a factor-based approach include…
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