Research Insight - "Factoring" in the Emerging Markets Premium - November 2014

categories: Indexes, Americas, EMEAI, Asia Pacific, Asset Owners, Hedge Funds, Equities, Research Paper, AYLUR SUBRAMANIAN Raman, DURAND Philippe, RAO Anil, Asset Managers (Quant or Fundamental), OBEROI Raina

Factor investing has become increasingly popular in developed markets. In this paper, we show that they have worked in emerging markets as well. All six MSCI Emerging Markets Factor Indexes outperformed the parent index over a 15-year plus period, based on simulations. Investors seeking premia in addition to broad EM beta can explore factor index investing via this index series. Active EM managers can also benefit from these tools. Traditionally, they have mainly harvested EM beta, along with Dividend Yield, Earnings Yield and Momentum factors. In the future, they might look to other factor indexes in their portfolio construction process.

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