Scientific Beta warns of factor-investing risks

"(...) A Scientific Beta study has highlighted the risks of deviating from academically validated factors and the limitations of many popular factor-investing solutions. A new study, "The Risks of ...

Cited As:

Noël Amenc, PhD

CEO - Scientific Beta

"(...) A Scientific Beta study has highlighted the risks of deviating from academically validated factors and the limitations of many popular factor-investing solutions. A new study, "The Risks of Deviating from academically Validated factors", has found the following dangers of not adhering to academic consensus when it came to factor investing: Factors used in investment practice showed a stark mismatch with factors that documented by financial economists; Commercial factors were based on complex composite definitions that offer maximum flexibility. Providers used this flexibility to seek out the factors with the highest performance in a given dataset; and Such practice allowed spurious factors to be found. This type of practice led to the presentation of in-sample performances that have very little chance of being reproduced out of sample, the firm said. (...)"

Type: Press article
Date: le 06/03/2019
Research Cluster : Finance
Source : Financial Express - MoneyManagement

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