Factor Investing Based On Risk, Not Returns

"(...) There is a contradiction between score-based factor design choices and the statistical beta-based risk analysis, says a survey by the EDHEC-Risk Institute and ERI Scientific Beta. It sa ...

"(...) There is a contradiction between score-based factor design choices and the statistical beta-based risk analysis, says a survey by the EDHEC-Risk Institute and ERI Scientific Beta. It says analysis of the extreme risk of factor portfolios is still fairly basic and does not really allow the extreme risks to be appreciated. The survey shows multi-factor strategies tend to be implemented in a passive investment context. Even when dynamic, factor investing is generally based on risk budget management rather than active views of returns. And, in spite of its limitations, the score-based approach dominates. Even though factor investing was founded on analyses in terms of betas, the measurement of betas is still in a minority and is rudimentary. As well, although valuation-based methods have been widely criticized in academia both for the value bias introduced and for their effectiveness and methods based on momentum are often highly sample-dependent and criticized for their arbitrary aspect, investors still favour these two approaches. (...)" 

Type: Press article
Date: le 05/02/2018
Research Cluster : Finance
Source : Private Wealth Canada

See Also

The FIR-PRI Awards “Finance & Sustainability” prize for “best pedagogical innovation”: preparing future generations to fight climate change.
News
- 18-10-2021
At EDHEC, we want to take part in the fight against climate change. Through our...
Stanford Summer Program: one of EDHEC’s opportunities to grab
News
- 14-10-2021
Shantanu Khandelwal, Master 2 student had the opportunity to join the selective...
Immersion at Station F for start-up challenge finalists !
News
- 13-10-2021
Devised for students with start-up projects on the Pre-Master and Master 1 years of the...
Financing your MBA - are you eligible for a scholarship?
News
- 12-10-2021
How to finance your Global MBA abroad is a critical question you need to think about...