The Dangerous Allure of Designer Risk Factors

"(...) A concern among academics and investors is that as these multifactor strategies become widespread – sold on promises of safer returns or higher returns, or safer, cheaper, and higher ...

Cited As:

Joe McGrath

Journalist

Felix Goltz

Head of Applied Research - EDHEC-Risk Institute

"(...) A concern among academics and investors is that as these multifactor strategies become widespread – sold on promises of safer returns or higher returns, or safer, cheaper, and higher returns – their buyers will forge ahead without understanding how fund firms cook up the recipe, or how to find out. This is a big issue, according to Felix Goltz, head of applied research at the EDHEC-Risk Institute. He argues that investors should ask for three things: access to the underlying data used during testing, the live performance, and validation of the methodology. "There should be an assessment not just of back-test performance, but of how reliable the back-test is," he says. "Is it based on factors and methodologies that are validated externally? Is it systematic? Is it consistent?" (...)" 

Type: Press article
Date: le 20/10/2017
Research Cluster : Finance
Source : Institutional Investor

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