Factor Investing Revisited
Journal of Index Investing, Forthcoming
22 Pages Posted: 3 Jul 2015
Date Written: July 3, 2015
This paper takes another look at the recommendation of Blitz  to allocate strategically to the value, momentum and low-volatility factor premiums in the equity market. Five years of fresh data shows that such a factor investing strategy continued to deliver out-of-sample. The potential added value of the two new factors in the Fama-French 5-factor model, operating profitability and investment, is investigated and found to depend critically on the performance metric that is considered most important. The paper also reviews the role of small-cap stocks, factor timing, long-only versus long-short portfolio construction, international evidence and factor investing beyond equities.
Keywords: factor investing, smart beta, value, momentum, low volatility
JEL Classification: G11, G12, G14
Suggested Citation: Suggested Citation