FactorResearch produce research to analyse factor investing and quantitative strategies from a markets perspective. Specifically, they focus on factors, which are also called alternative risk premia or style premia, in developed equity markets.
Factor portfolios are typically created by equal weighting stocks. The impact of single stocks is therefore reduced compared to market-cap weighted indices. The FAANG stocks impacted factors differently.
Portfolios frequently contain stocks representing duplicate factor risks or insignificant weights. An optimisation process focused on factor exposure can increase the portfolio efficiency. Increasing or decreasing factor exposure requires a view on e...
Most factor investing research is based on long-short stock portfolios. Investible risk premia strategies often feature a short index position. Trade-off between theoretical alpha and implementation costs & efficiency.
The simplicity of the Momentum factor can be intellectually challenging. Various alternative Momentum versions highlight remarkable similar return profiles. The robustness is an attractive characteristic of the investment strategy.
Investors can express factor views via smart beta ETFs or mutual funds. Some mutual funds offer higher factor exposure than smart beta ETFs. Given higher fees, strong views on expected factor performance are required.