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 FIGHT AGAINST SEXUAL AND GENDER-BASED VIOLENCE, A CORE COMPONENT OF THE START TO THE ACADEMIC YEAR FOR PRE-MASTER STUDENTS
News
- 20-09-2022
As part of the programme organised at the start of the academic year for EDHEC Business...
The EDHEC Global MBA ranked 14th in Europe in the Bloomberg Best B-School 2022-23 list
News
- 19-09-2022
The EDHEC Global MBA has been featured once again in the prestigious Bloomberg...
The new EDHEC PhD in Finance cohort ready to embrace challenges of doctoral studies
News
- 16-09-2022
A new cohort of 12 PhD executive  track participants and 2 residential track...
Green finance sector initiative for decarbonization: new paper out by Irene Monasterolo with The World Bank
News
- 15-09-2022
  Does greening the financial sector have real world impact? Green financial sector...