Factor strategies should be based on scientific consensus

"(...) Investors should take note of the debate taking place within the factor investing industry. On one side, are those who support a purist approach to the definition of factors, arguing th ...

Cited As:

Noël Amenc

CEO - ERI Scientific Beta

"(...) Investors should take note of the debate taking place within the factor investing industry. On one side, are those who support a purist approach to the definition of factors, arguing that factor strategies should be built using factor proxies that undergo rigorous scientific tests. Scientific Beta, the organisation linked to EDHEC Business School, is a vocal supporter of this approach. (...) However, Scientific Beta has shown that providers have a tendency to review their factor proxies after relatively short periods of time. Rigour, in Scientific Beta’s view, would require proxies to be consistent over time. Scientific Beta’s CEO, Nöel Amenc, says that this is a false dichotomy (see Strategically Speaking, page 72). He argues that scientific consensus shows that only a limited number of straightforward proxies pass the robustness test. However, strategies based on more complex factor definitions continue to attract assets. (...)"

Type: Press article
Date: le 02/12/2019
Research Cluster : Finance
Source : IPE

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