Click HERE to access last week's Introduction to Factor Investing

Key Takeaways:

  • Our Factor Investing Model will be based on 5 common factors (value, quality, low volatility, momentum and size). During 3Q 2021, momentum did well while the other factors were flat to down. Over the past year, the size premium (small-cap stocks over large-cap stocks) led the way.
  • In this report we will be covering three factors: low volatility, momentum, and size. Low volatility includes stocks with price movement less then the market, momentum measures stocks that have appreciated the most over a period and size refers to market capitalization.
  • We introduced value and quality in the first part of this three part series. The next and final piece will explain how we construct a portfolio using these factors.
  • Static factor portfolios have struggled over the past 18 months, and have not contributed consistent positive return since about 2013.
  • A simple factor timing overlay, however, has performed better, particularly during the recent downturns in the value and low-volatility factors.
This is the second part of a series of regular research notes commenting on the performance and general landscape for factor investors. Quant investors, who are generally aware of these issues can use this second s...

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