The Characteristics of Factor Investing

27 Pages Posted: 27 Jul 2018 Last revised: 27 Oct 2018

See all articles by David Blitz

David Blitz

Robeco Quantitative Investments

Milan Vidojevic

Robeco Quantitative Investments

Date Written: July 2, 2018


We dissect the realized performance of factor-based equity portfolios using a characteristics-based multi-factor return model. We show that generic single-factor portfolios, which invest in stocks with high scores on one particular factor, are sub-optimal because they ignore the possibility that these stocks may be unattractive from the perspective of other factors. We also show that differences in performance between (i) integrated and mixed-sleeve multi-factor portfolios, (ii) small-cap and large-cap factor portfolios, and (iii) equal and value-weighted factor portfolios can be fully attributed to the differences in their factor characteristics. We conclude that efficient factor investing requires an understanding of how factor characteristics drive portfolio returns.

Keywords: factor investing, smart beta, factor premiums, size, value, momentum, quality, low-volatility

JEL Classification: G11, G12, G14

Suggested Citation

Blitz, David and Vidojevic, Milan, The Characteristics of Factor Investing (July 2, 2018). Available at SSRN: or

David Blitz

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3014 DA

Milan Vidojevic (Contact Author)

Robeco Quantitative Investments ( email )

1111 Brickell Avenue, Robeco, Suite 2125
Miami, FL 33131
United States

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