Factor Investing

Our research has identified factors that have historically earned a persistent premium over time. These factors can be can be represented by factor indexes representing value, quality, momentum, dividend yield, momentum and low size. With insights on more than 40 years of factor data, our work informs effective risk modelling and investment management practices.


 

Featured research papers and Blog posts


All FAANGs are not created equal

Blog Post - Commonly grouped as tech stocks or growth companies, it seems reasonable to assume that FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) share many characteristics. However, when we used MSCI FaCS to examine them through the lens of performance-driving factors, we found their characteristics were far from homogeneous.


What is going on with factor returns?

Blog Post - Value and momentum factors typically move in opposite directions—that is, when one outperforms the market, the other usually underperforms. In June, however, both factors underperformed the market, leading some observers to question whether this change in market behavior is impairing quantitative strategies.


Can your investment strategy work with China A shares?

Blog Post - Many institutional investors have long viewed China A shares as an inefficient market, suggesting that active strategies such as stock-picking can thrive. However, researching a universe of over 3,500 stocks comes with huge challenges, and may lead investors to question whether factor-based systematic strategies could have worked well with China A shares. 


Vive la Différence: Active Factor Strategies in China A Shares

Research Paper - Can factor insights be applied to construct equity portfolios in the China A shares market? With the partial inclusion of China A shares in the MSCI Emerging Markets Index, we explore whether the China A shares market has distinctive characteristics that lend themselves to factor investing strategies.


How can Factors be Combined?

Research Paper - Making allocations to individual factors typically requires strong investment beliefs, as factor returns have been cyclical in nature. When evaluating multi-factor indexed approaches, institutional investors often consider both bottom-up or top-down options. We weigh the attractions of both in terms of their level of exposure to the target factors as well as their capacity and investability profiles.


What’s Your Factor Footprint?

Research Paper - Given the growing popularity of factor investing, capacity is now becoming a key issue for these strategies. How much capital can be invested in these strategies without impairing returns? We suggest six ways that factor investors can modify their strategies to reduce their factor footprint, while still capturing the desired factor exposure.


Understanding Factor Exposures When Markets Become Volatile

Blog Post - How did different equity factors fare during the past week’s market turmoil? When markets are gyrating, it can be difficult to figure out just what is happening. Real-time data provides greater insight into market events as they unfold.


Dissecting the stock market sell-off

Blog Post - Growing fears about rising inflation and interest rates sparked a decline across equity markets in the last few days. The MSCI USA Index fell 2% on Friday and a further 4% on Monday. Has the sell-off been indiscriminate? Or has it affected certain sectors and factors more than others?

MSCI Factor Investing Webinar Series

We discuss the evolution of factor investing, look at markets in 2016 through the lens of factor investing and conclude with a deep dive into the developing area of dynamic factor allocation.

FLIGHT TO QUALITY

The quality factor has demonstrated long-term outperformance against the market, but it has not received the same attention as the value, size or momentum factors.

Finding Value: Understanding Factor Investing

The perennial appeal of value investing is based on the excellent long-term performance of global value stocks. Investors today use various approaches to identify the exposure of stocks with “value” characteristics that help explain risk and return.