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- Factor Investing
Our latest research
Equity factor investing was pioneered in the 1970s based on the research, data and analytics created by Barra – today part of MSCI. In recent years, MSCI has developed a broad range of indexes and analytical models that provide institutional investors with tools for evaluating factors and incorporating factor strategies into their portfolios.
MSCI has developed Factor Indexes, FaCS and Analytics backed by four decades of Factor research and innovation.
Research PaperFoundations of Factor Investing
Factor investing has become a widely discussed part of today’s investment canon. This paper is the first in a three-paper series focusing on factor investing. In this paper we lay out the rationale for factor investing and how indexation can capture factors in cost-effective and transparent ways.  The next papers series cover various aspects of implementation including use cases we have seen.
MSCI BlogWHAT IS FACTOR INVESTING?
Equity factor investing aims to capture exposures to different equity risk premia. Factor modeling and factor investing are rooted in the Capital Asset Pricing Model (CAPM) dating from the mid-1960s, Arbitrage Pricing Theory from the 1970s and Fama and French’s three-factor model from the 1990s.
Research PaperFactor Investing and ESG Integration
Integrating ESG criteria into equity portfolios raises important portfolio construction questions. For example, what is the impact of ESG on portfolio performance and characteristics? How does it alter the risk profile and the factor exposures of portfolios? How does it affect institutional investors’ ability to pursue their investment strategy? Our results show that integrating ESG criteria into passive strategies generally improved risk-adjusted performance over the period 2007 to...
Research PaperResearch Spotlight - Foundations of Factor Investing
This paper discusses the rationale for factor investing and how indexe can be constructed to reflect factor returns in cost-effective and transparent ways. We currently identify six equity risk factors that have historically earned a long-term risk premium and represent exposure to systematic sources of risk: Value, Low Size, Low Volatility, High Yield, Quality and Momentum.
MSCI BlogFINDING VALUE: UNDERSTANDING FACTOR INVESTING
Despite agreement on the principles of value investing, the investment community uses a number of different metrics to describe the value factor. Each metric (or descriptor) has its own advantages and pitfalls.
MSCI BlogCreating a common language for factor investing
Investors need a clear and consistent way to talk about factors. For more than 40 years, MSCI has defined how investors use factors to analyze risk and return, from individual stocks to entire portfolios. Factors are important drivers of portfolio performance and are well documented in academic research. They are used to quantify how much risk and return is attributable to different countries, sectors and styles.
MSCI BlogFactor investing goes multi-asset class
Factor investing is now going multi-asset class: to factor-based asset allocation and systematic strategy factors that push beyond equity selection.