Bull run shows up differences in how factor strategies are built
Differences in performance reflect market exposure, factor construction and risk budgeting, writes Luc Dumontier of LFIS
Last year, the S&P 500 delivered a net total return of about 21% – its best yearly performance since the launch of the first factor-investing strategies. Annualised volatility was around 7%, and implied volatility dipped regularly below 10%.
Yet the performance of different factor strategies varied widely – both for strategies based on different premia and for specific implementations of strategies based on the same premia. Why?
A look back at the year shows how the answer lies in market
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