Do Factor Strategies Beat the Market?  Sometimes Yes. Sometimes No.

Abstract

Following two decades of skepticism and doubt, combined with worries about a replication crisis in finance, factors such as size and value have re-emerged as statistically robust effects, verified by multiple author teams using larger and more comprehensive datasets than heretofore available. Historical evidence simultaneously shows that even well-attested factors, when implemented as long-only portfolios in the world, have repeatedly underperformed the market for periods lasting a decade or more. This paper counterposes the historical and statistical evidence and suggests an integration.

Keywords: factors, size effect, value stocks, long run asset returns

JEL Classification: G11, G12