Navigating the Factor Zoo Around the World: An Institutional Investor Perspective

62 Pages Posted: 1 Jun 2020 Last revised: 17 Mar 2021

See all articles by Söhnke M. Bartram

Söhnke M. Bartram

University of Warwick; Centre for Economic Policy Research (CEPR)

Harald Lohre

Robeco Quantitative Investments; Lancaster University Management School

Peter F. Pope

Bocconi University; London School of Economics and Political Science

Lakshmi Ranganathan

Lancaster University; Invesco

Date Written: December 29, 2019


The literature on cross-sectional stock return predictability has documented over 450 factors. We take the perspective of an institutional investor and navigate this zoo of factors by focusing on the evidence relevant to the practicalities of factor-based investment strategies. Establishing a sound theoretical rationale is key to identifying “true” factors, and we emphasize the need to recognize data-mining concerns that may cast doubt on the relevance of many factors. From a practical investment perspective, much of the factor evidence documented by academics may be more apparent than real. The performance of many factors is dependent on the inclusion of small- and micro-cap stocks in academic studies, although such stocks would likely be excluded from the real investment universe due to illiquidity and transaction costs. Nevertheless, a parsimonious set of factors emerges in equities and other asset classes, including currencies, fixed income and commodities. These factors can serve as meaningful ingredients to factor-based portfolio construction.

Keywords: Asset pricing, mispricing, risk factor, institutional investor, transaction costs, limits to arbitrage, market efficiency, anomaly

JEL Classification: G11, G12, G15

Suggested Citation

Bartram, Söhnke M. and Lohre, Harald and Pope, Peter F. and Pallasena Ranganathan, Ananthalakshmi, Navigating the Factor Zoo Around the World: An Institutional Investor Perspective (December 29, 2019). Available at SSRN: or

Söhnke M. Bartram (Contact Author)

University of Warwick ( email )

Warwick Business School
Finance Group
Coventry, CV4 7AL
United Kingdom
+44 (24) 7657 4168 (Phone)
+1 425 952 1070 (Fax)


Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Harald Lohre

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3011 AG

Lancaster University Management School

Lancaster LA1 4YX
United Kingdom


Peter F. Pope

Bocconi University ( email )

Dept of Accounting
Milan, 20136

London School of Economics and Political Science ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Ananthalakshmi Pallasena Ranganathan

Lancaster University ( email )

Lancaster, Lancaster LA14YX
United Kingdom

Invesco ( email )

An der Welle 5
Frankfurt am Main, 60322

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