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Research Insight - Factor Indexes in Perspective: Insights from 40 Years of Data Part I: Study - September 2014

categories: Indexes, Americas, EMEAI, Factor and Risk Modeling, Investing (Investment Management), Performance Analysis, Portfolio Construction and Optimization, Asia Pacific, Asset Owners, Equities, Research Paper, AYLUR SUBRAMANIAN Raman, KULKARNI Padmakar, Asset Managers (Quant or Fundamental), Banks, ALIGHANBARI Mehdi, general

Until recently, MSCI had calculated 25 years of simulated history for its factor indexes. In this Research Insight, we extend the simulated history to 40 years, providing new insights into the behavior of factor indexes over various time periods. We look at factor index behavior over various time frames; the changes in the correlation between factor returns over this period; historical variations in valuation of factor indexes and their exposure to GICS sectors. We also use IndexMetrics, MSCI's analytical framework, to investigate various characteristics of factor indexes, such as risk, return, liquidity, investability and cost.

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