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  1. BLOG

    Using Factors As a Magnifying Glass for Equities 

    Oct 14, 2020 Donald Sze

    Factor Indexes , Factor Investing , Factors

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    Factors have been shown to be important systematic sources of risk and return. We examine how factor analysis can help identify investment characteristics that lie beneath the surface of seemingly similar stocks and equity portfolios.

  2. BLOG

    Factors in Focus: Impact of Inflation on Style Factors 

    Oct 2, 2020 Hitendra D Varsani , Waman Virgaonkar

    Factor Investing , Global Investing , Risk Management

    Learn More

    Global equities continued to rally in Q3, brushing aside fear of a second wave of COVID-19 and a large economic slump. We review what it meant from an equity and fixed-income factor perspective and look at what our models showed headed into Q4

  3. BLOG

    How to Describe a Factor 

    Sep 10, 2020 Abhishek Gupta , Ashish Lodh , Subhajit Barman

    Factor Indexes , Factor Investing , Factors

    Learn More

    How to define a factor? It’s a challenge for asset owners and wealth managers in evaluating how well factor products meet investment objectives. We found an improved and more robust measure can be formed by combining multiple descriptors. 

  4. BLOG

    Understanding the Industry-Momentum Factor 

    Aug 19, 2020 Alex Johnson , Simon Minovitsky

    Factor Investing , Risk Management , Global Investing

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    When COVID-19 first swept through global equity markets, many factors exhibited unprecedented performance swings. How could institutional investors interpret the industry-momentum factor’s moves in the context of the underlying market dynamics?

  5. BLOG

    Growth Without the Side Effects 

    Aug 17, 2020 Mehdi Alighanbari

    Factor Indexes , Factor Investing , Factors

    Learn More

    Growth has sometimes been viewed as the opposite of value. By extending the concept of growth at a reasonable price, we were able to capture the growth premium without it being lost to unintended factor exposures.

  6. BLOG

    Corporate Bonds Through a Factor and ESG Lens 

    Jul 20, 2020 Rohit Mendiratta , Hitendra D Varsani

    ESG Research , Factor Indexes , Factor Investing , Factors , Fixed Income , Risk Management

    Learn More

    COVID-19 has had a profound impact on how companies manage cash flows and liquidity. Bond investors face the possibility of increased leverage, rating downgrades and defaults. Can factors and ESG metrics shed light on these risks?

  7. BLOG

    Measuring Firms’ Remote-Workforce Abilities 

    Jul 14, 2020 Howard Zhang , Daniel R. Barrera , Manuel Rueda

    Factor Investing , Factors

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    It’s clear that some companies were better positioned to take advantage of a remote work environment than others. We built a hypothetical “remote-operation capacity” factor to seek to measure the effect on different firms.

  8. BLOG

    Factors in Focus: How Trendy Is Your Style Factor? 

    Jul 6, 2020 Hitendra D Varsani , Waman Virgaonkar , Rohit Mendiratta

    Factor Investing , Risk Management

    Learn More

    As markets rallied worldwide, investors took on high-beta exposure and rotated away from stocks with lower risk. The latest edition of Factors in Focus explores the details.

  9. BLOG

    Did Value-Factor Exposure Deliver for Value Funds? 

    Jun 29, 2020 Saurabh Katiyar , Ashish Lodh , Vishad Bhalodia

    Factor Investing , Global Investing

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    Building on previous MSCI research into the nuanced performance of the value factor, including the impact of sectors and other style factors, we look at how exposure to value drove the performance of actively managed value funds.

  10. BLOG

    Short Interest Factor Performance in Times of Crisis 

    Jun 24, 2020 Vipul Jain , Roman Kouzmenko

    Factors , Factor Investing

    Learn More

    Given recent short interest factor performance, we asked: What has been the relationship between this factor and large market drawdowns? Were there changes in short selling during COVID-19? Did short-selling bans affect short interest factor performance?

  11. BLOG

    Outcome-Oriented Factor Investing with a ‘Barbell’ Approach 

    Jun 1, 2020 Zhen Wei , Shuo Xu

    Factor Indexes , Factor Investing , Global Investing

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    Though relatively new to wealth investors, index-based factor investing has some similarity to a high-conviction, outcome-oriented approach. We explore combining the two when seeking outcomes such as equity growth, yield enhancement and risk mitigation.

  12. BLOG

    How Hedge Funds Navigated the Start of COVID-19 Volatility 

    May 8, 2020 Donald Sze , Navneet Kumar

    Factor Investing , Factors , Risk Management

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    How did hedge funds navigate the initial volatility amid COVID-19? Though holdings information is limited, and delayed, we gained insights into their reaction by examining the change in hedge-fund portfolios between the end of January and end of February.

  13. BLOG

    Hunting a COVID-19 factor 

    Apr 29, 2020 George Bonne , Jun Wang

    Factor Indexes , Factor Investing , Factors

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    Can we identify a COVID-19 factor and quantify companies’ exposure to it? We explored three ways to do so — from very simple to more complex methods.

  14. BLOG

    Resilient stocks during the dog days of March 

    Apr 17, 2020 Mehdi Alighanbari

    Factor Investing , Factor Indexes , Factors

    Learn More

    While many stocks were in the red in mid-March, as COVID-19 and oil-market shocks took hold, some were “redder” than others. We examine global markets to better understand the characteristics of the more resilient stocks during this period.

  15. BLOG

    Can diversification help weather the coronavirus storm? 

    Apr 16, 2020 Raina Oberoi , Abhishek Gupta , Jean-Maurice Ladure

    Emerging Markets , Factor Indexes , Factor Investing , Factors , Global Investing

    Learn More

    Whether investors include a tactical approach or invest strategically for the long term, diversifying across factors, sectors and geographies has historically played an important role in portfolio construction. 

  16. BLOG

    Factors in Focus: Risk sentiment and factor dynamics in a crisis 

    Apr 2, 2020 Hitendra D Varsani , Waman Virgaonkar , Rohit Mendiratta

    Factor Indexes , Factor Investing , Factors , Fixed Income

    Learn More

    We analyzed the market effects from COVID-19 and a Saudi Arabia/Russia oil-price war. We also examined – for the first time – credit factor performance. How did the quarter play out? What did our adaptive multi-factor model show as it ended?

  17. BLOG

    The coronavirus market impact spreads globally 

    Mar 5, 2020 Jun Wang , Jay Yao , George Bonne

    Factor Investing , Global Investing

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    Fear of a coronavirus pandemic and ensuing economic impacts caused sharp drops in global markets after an initially mild response. We look at recent performance from a factor perspective and how quickly factor returns and volatility reverted in past crises.

  18. BLOG

    The coronavirus epidemic: Implications for markets 

    Feb 12, 2020 Zhen Wei , Jun Wang , Thomas Verbraken

    Economic Exposure , Emerging Markets , Factor Investing , Fixed Income , Global Investing , Risk Management

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    The toll from the coronavirus has been felt throughout societies, leading to repercussions on the global economy and financial markets. We examine investor impact through markets’ economic exposures to China and factors and by stress testing portfolios.

  19. BLOG

    Factors in Focus: Will 2020 vision sharpen exposures? 

    Jan 6, 2020 Waman Virgaonkar , Hitendra D Varsani

    Factor Indexes , Factor Investing , Factors

    Learn More

    Some global equity markets reached all-time highs and experienced limited bouts of volatility over the course of 2019. But underneath the calm surface, we saw a high degree of dispersion among factors and sectors.

  20. BLOG

    Factors behind value’s underperformance 

    Nov 22, 2019 Leon Roisenberg

    Factor Indexes , Factor Investing , Factors

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    As the relationship between U.S. value factors’ exposures and returns deteriorated over the last decade, U.S. momentum’s return patterns improved. We examine the value-momentum relationship and contributions of other style factors to value’s performance.

  21. BLOG

    Did insider transactions have secrets to tell? 

    Nov 19, 2019 Vipul Jain , Roman Kouzmenko

    Factor Investing , Factors , Risk Management

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    Company insiders’ trading of their company’s stock is usually subject to strict rules, including public disclosure. Did observing insider transactions provide more information about expected company performance than traditional sources?

  22. BLOG

    Beware high dividend yield traps 

    Oct 25, 2019 Jean-Maurice Ladure , Ashish Lodh , Saurabh Katiyar

    Factor Investing , Factors , Risk Management

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    During low interest-rate, high-volatility environments, some investors have turned to high dividend-paying stocks. However, overly simplistic approaches to selecting dividend-paying securities exposed investors to potential “yield traps.” Could these traps have been avoided?

  23. BLOG

    Value investing is down. But is it out? 

    Oct 23, 2019 Anil Rao , Abhishek Gupta

    Factor Indexes , Factor Investing , Factors , Global Investing

    Learn More

    Value stocks generally underperformed the broad U.S. equity market over the past decade — just as they did in the late 1990s. What drove that underperformance? Was it consistent globally? Within U.S. sectors?

  24. BLOG

    Factors separated fact from fiction 

    Oct 16, 2019 George Bonne

    Factor Indexes , Factor Investing , Factors

    Learn More

    Technological advances have expanded the application of factors. What was the realm of quantitative investors has become more accessible, bringing greater transparency and potential insight into portfolio characteristics and performance drivers.

  25. BLOG

    Retire in Monte Carlo? Simulating retirement outcomes 

    Oct 11, 2019 Anil Rao

    ESG Research , Factor Investing , Models/Client Cases , Risk Management

    Learn More

    Despite global equity performance, U.S. DC plan participants may be ill prepared to meet retirement-spending needs. We assessed four equity-allocation scenarios — including an equity multifactor allocation  and integration of ESG views —  to see which performed best.

  26. BLOG

    Factors in Focus: Momentum hits a valuation speed bump 

    Oct 3, 2019 Waman Virgaonkar , Hitendra D Varsani

    Factor Investing , Factors , Models/Client Cases , Risk Management

    Learn More

    The momentum-value spread saw one of the largest corrections in history over the summer. What does our model show going forward?

  27. BLOG

    Growth’s recent outperformance was and wasn’t an anomaly 

    Sep 20, 2019 Shubhangi Sharma , Mehdi Alighanbari

    Factor Investing , Factor Research Group , Factors

    Learn More

    Growth strategies have outperformed value strategies in recent years. Is growth’s recent performance an anomaly when we look at it in a long-term context? The answer: It depends on what you mean by a growth strategy.

  28. BLOG

    Back-to-school (momentum) blues? 

    Sep 13, 2019 Leon Roisenberg , George Bonne

    Factor Investing , Models/Client Cases , Factors

    Learn More

    The U.S. price momentum factor, which we highlighted for elevated crowding scores and vulnerability to negative performance at the end of June, suffered sizable drawdowns in the first seven trading days of September.

  29. BLOG

    A smoother ride? Looking at factor-based asset allocation 

    Sep 3, 2019 Andrea Amato , Chenlu Zhou

    Factor Investing , Models/Client Cases , Risk Management

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    On the surface, holding-based asset allocation appears to produce stability. But is what you see always what you get? We investigate the pros and cons of a factor-based approach.

  30. BLOG

    Where were the (factor) crowds this summer? 

    Aug 21, 2019 George Bonne , Leon Roisenberg

    Factor Investing , Factors

    Learn More

    When factors have historically become crowded, they’ve often experienced significant drawdowns in subsequent months. Which factors were relatively crowded at the end of 2018 — and how did they perform in the first half of 2019?

  31. BLOG

    More than a feeling: Quantifying consumer sentiment 

    Jul 17, 2019 George Bonne , Rohit Mendiratta

    Factor Research Group , Factor Investing , Factors

    Learn More

    Among a flood of alternative data sources, consumer sentiment based on citations online stood out.

  32. BLOG

    Factors in Focus: Dynamic short term, strategic long term 

    Jul 2, 2019 Waman Virgaonkar , Hitendra D Varsani

    Factor Investing , Factor Research Group , Factors

    Learn More

    We review factor performance over the second quarter, provide the perspective of a long-term view and look to indications from our adaptive multi-factor model heading into Q3.

  33. BLOG

    Lessons from Woodford: Shutting the barn door after the horses have bolted 

    Jun 14, 2019 András Bohák , Roman Kouzmenko , Dimitris Melas

    Factor Investing , Factors

    Learn More

    The suspension of the U.K.’s Woodford Equity Income Fund highlights the value of regularly reviewing a portfolio’s factor exposures and liquidity characteristics for signs of style drift or deteriorating ability to redeem shares.

  34. BLOG

    The rise of fundamental factors in China A shares 

    Jun 6, 2019 Oleg Ruban

    Emerging Markets , Factor Investing , Global Investing

    Learn More

    Commonly held perceptions about China A shares have influenced investors to think factor strategies may not work in the Chinese equity markets. Our research suggests this may be changing.

  35. BLOG

    Factor investing in Saudi Arabia: size matters 

    May 7, 2019 Saurabh Katiyar , Neeraj Dabake

    Factor Indexes , Factor Investing

    Learn More

    Foreign interest has risen in Saudi Arabia following the easing of foreign-ownership limits. Our analysis shows investors would have benefited by controlling for exposure to small-cap companies.

  36. BLOG

    Factors in Focus: Risky start. Quality finish. 

    Apr 2, 2019 Hitendra D Varsani , Waman Virgaonkar

    Factors , Global Investing , Factor Investing

    Learn More

    We highlight the fast-moving rotation among factors that continued during Q1 2019. As we move into Q2 2019, this framework showed allocation changes in different factors.

  37. BLOG

    Factors and ESG: the truth behind three myths 

    Mar 20, 2019 Guillermo Cano

    Models/Client Cases , ESG Research , Factor Investing

    Learn More

    There are misconceptions of the relationship between factors and ESG issues. We debunked three common myths about ESG, momentum, quality and smaller-cap stocks.

  38. BLOG

    Venezuela and the Specter of Recovery Risk 

    Feb 14, 2019 Hamed Faquiryan , Manuel Rueda

    Fixed Income , Global Investing , Factor Investing

    Learn More

    Venezuela unfortunately finds itself on the verge of political and economic collapse. From the perspective of investors in the country’s sovereign and corporate bonds, recovery risk is now likely a bigger consideration than default risk.

  39. BLOG

    What market volatility has meant for factors 

    Feb 13, 2019 Guillermo Cano

    Factors , Factor Research Group , Factor Investing

    Learn More

    As investors continue to focus on factor investing in periods of heightened volatility, we ask how volatility has affected factor performance.

  40. BLOG

    What Fed monetary policy has meant for factors 

    Feb 6, 2019 Raina Oberoi , Abhishek Gupta

    Factors , Factor Research Group , Factor Investing

    Learn More

    As interest rates in the U.S. started increasing in late 2015, many investors expressed concerns over the impact that rising rates could have on their investments. However, the tone of the U.S. Federal Reserve (the Fed) shifted from “we’re a long way from neutral” in October last year to a more accommodative stance of “we will be patient” early this year, re-emphasizing that expression at the January 2019 Federal Open Market Committee meeting.

  41. BLOG

    Should we be surprised by earnings surprises? 

    Feb 1, 2019 Rohit Mendiratta , George Bonne

    Factors , Factor Research Group , Factor Investing

    Learn More

    Early 2019 earnings season has already contained a number of high-profile surprises, such as Facebooks's, but how predictable are these surprises, and what happens when earnings surprises return to trend?

  42. BLOG

    What has affected minimum volatility index performance? 

    Jan 31, 2019 Waman Virgaonkar , Mehdi Alighanbari

    Factor Indexes , Factors , Factor Investing

    Learn More

    As we head further into 2019, some of last year’s concerns, including market volatility and interest-rate uncertainty, continue to occupy investors’ minds. With the assumption that rates-related concerns continue and uncertainty looms in the global equity markets, the question is how minimum volatility indexes behaved in an environment dominated by these two opposing forces.

  43. BLOG

    Factors in Focus: Navigating turbulent markets 

    Jan 8, 2019 Hitendra D Varsani , Vipul Jain

    Factors , Global Investing , Factor Investing

    Learn More

    In this inaugural Factors in Focus, we highlight the fast-moving rotation among factors that may have impacted investor portfolios during 2018, and we look to indications from our adaptive multi-factor framework. As 2019 began, this framework showed an overweight allocation to minimum volatility and quality, an underweight allocation to value, low size and momentum, and a neutral position on high dividend yield relative to a six-factor equally-weighted mix.

  44. BLOG

    Beaten-down beta 

    Jan 3, 2019 Roman Kouzmenko , Anil Rao

    Factor Investing

    Learn More

    U.S. and international equity markets fell sharply to close out 2018. The MSCI USA Index fell 15% in the fourth quarter alone. (It fell a total of 6% for the year.) As we previously examined, investors began rotating from cyclical sectors and factors to defensive ones in June. This pattern continued, in earnest, until October.

  45. BLOG

    Equity markets in November – Do pro-cyclical risks remain? 

    Dec 19, 2018 George Bonne , Leon Roisenberg

    Models/Client Cases , Factor Indexes , Factor Investing

    Learn More

    In our recent blog, “Equity markets in October – Has the tide turned?” we highlighted a rotation from pro-cyclical to defensive factors and sectors that began in June and accelerated in October. We also found that crowding in the momentum factor in the U.S. remained high, which suggested continued risks to momentum and other pro-cyclical themes.

  46. BLOG

    Factor investing goes multi-asset class 

    Dec 11, 2018 Peter Shepard

    Factor Indexes , Factors , Factor Investing

    Learn More

    Factor investing is now going multi-asset class: to factor-based asset allocation and systematic strategy factors that push beyond equity selection.

  47. BLOG

    What it may mean for Japanese stocks if easy money ends 

    Nov 22, 2018 Naoya Nishimura

    Models/Client Cases , Global Investing , Factor Investing

    Learn More

    Some observers are concerned that when the Bank of Japan (BOJ) eventually ends its ultra-easy monetary policy, it could hurt the Japanese stock market. Part of this concern stems from the fact that the BOJ’s unconventional monetary policy involves purchasing Japanese exchange-traded funds (ETFs).

  48. BLOG

    Small cap allocations may not be that straightforward 

    Nov 20, 2018 Abhishek Gupta

    Global Investing , Factor Investing

    Learn More

    The low size factor, or the premium that has been historically realized by investing in smaller sized companies over longer time periods, forms an integral component of many institutional portfolios. However, investors can choose different ways to making a low size allocation.

  49. BLOG

    Sector investing in China 

    Nov 14, 2018 Anil Rao

    Emerging Markets , Global Investing , Factor Investing

    Learn More

    As the China A shares market has evolved, investors have faced new choices. They can continue with broad allocations to the emerging markets (EM), choose slightly narrower allocations to China and other specific EM countries or consider targeted investments within China through a variety of means.

  50. BLOG

    Which factors mattered in China? 

    Nov 7, 2018 Oleg Ruban

    Models/Client Cases , Global Investing , Factor Investing

    Learn More

    Chinese equity prices have hardly been music to investors’ ears so far in 2018. The MSCI China A Onshore IMI Index — the broadest MSCI A shares index designed to represent the performance of the overall A shares market — has declined more than 25% in local currency terms through Oct. 31, 2018. Were there factors in this market that outperformed?

  51. BLOG

    Equity markets in October – Has the tide turned? 

    Nov 5, 2018 Leon Roisenberg , George Bonne

    Models/Client Cases , Factor Indexes , Factor Investing

    Learn More

    October’s market sell-off reflected investors’ concerns with the sustainability of economic growth, the longer-term impact of trade tariffs and rising interest rates. In all, it seemed to be a shift away from pro-cyclical themes. Do risks remain for those areas of the market?

  52. BLOG

    What drives the capacity of factor index strategies? 

    Oct 30, 2018 Stuart Doole

    Factor Indexes , Factors , Factor Investing

    Learn More

    As factor investing becomes increasingly “business as usual,” institutional investors have become keenly interested in the ability of strategies that replicate factor indexes to persistently capture desired exposures without compromising exposure to the target factor. We illustrate six index design approaches that can be used to tackle this challenge.

  53. BLOG

    Did FAANG stocks lead the US stock market drop? 

    Oct 15, 2018 Andrei Morozov , Jun Wang

    Factor Investing

    Learn More

    Fears of a global slowdown have sent U.S. stock markets plummeting recently. Given FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) have been a dominant force in driving U.S. market performance higher over the past few years, did these stocks lead the market’s downward trajectory?

  54. BLOG

    How the low volatility factor has performed in China A shares 

    Oct 11, 2018 Zhen Wei

    Global Investing , Factor Investing

    Learn More

    Which factors have performed best in the China A market, especially given its relatively high annualized market volatility? Is there too much risk to bear? We investigate the role that the minimum volatility factor has played.

  55. BLOG

    How can active managers add factors to the portfolio? 

    Oct 2, 2018 Dimitris Melas

    Factors , Factor Investing

    Learn More

    Discretionary managers use fundamental analysis to select stocks and construct portfolios that seek to beat the market. These managers face substantial headwinds in the current environment. From a business perspective, they are under pressure to reduce cost and improve performance. The market environment has also been challenging, as high correlations between stocks and the dominance of a handful of large technology companies have made it harder to generate alpha from stock selection.

  56. BLOG

    Weighty matters: Going beyond stock-picking 

    Aug 30, 2018 Anil Rao

    Factor Investing

    Learn More

    Fundamental equity managers have traditionally looked for an edge using various strategies and approaches. Here we examine whether it historically has been possible to manage a fund’s risk exposures without disturbing the underlying investment process.

  57. BLOG

    Is momentum a crowded trade that is starting to unwind? 

    Aug 29, 2018 George Bonne , Leon Roisenberg

    Models/Client Cases , Factor Indexes , Factor Investing

    Learn More

    The momentum factor has been on a tear the last year and a half. Is momentum a crowded trade that has started to unwind?

  58. BLOG

    Why is Tesla a short-selling target? 

    Aug 13, 2018 Dimitris Melas , George Bonne

    Models/Client Cases , Integrated Risk Management , Factor Investing

    Learn More

    Elon Musk, founder and CEO of Tesla, suggested in a series of tweets that going private could help Tesla avoid the scrutiny of quarterly reporting and pressure from short selling. Do companies targeted by short sellers share common characteristics? Could factor analysis help investors identify stocks that may become short-selling targets?

  59. BLOG

    All FAANGs are not created equal 

    Aug 3, 2018 George Bonne

    Factors , Factor Investing

    Learn More

    FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) make up nearly 40% of the NASDAQ 100 index, and smaller but significant weights in many others. Commonly grouped as tech stocks or growth companies, it seems reasonable to assume they share many similar characteristics. However, when examined through the lens of performance-driving factors, their characteristics are far from homogeneous.

  60. BLOG

    What is going on with factor returns? 

    Jul 18, 2018 Leon Roisenberg

    Factor Indexes , Factors , Factor Investing

    Learn More

    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.

  61. BLOG

    Can your investment strategy work with China A shares? 

    Jun 27, 2018 Zhen Wei

    Global Investing , Factor Investing

    Learn More

    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.

  62. BLOG

    Speed bump or regime shift? Deconstructing the recent spike in equity market volatility 

    Feb 23, 2018 Chenlu Zhou

    Factors , Factor Investing

    Learn More

    The week of Feb. 5 witnessed a return of market volatility not seen since the days of the euro crisis in 2011. After hovering near 10% for most of the past year, the level of the VIX briefly topped 50%. What caused the spike?

  63. BLOG

    Do factors stand up to FAANG? 

    Feb 21, 2018 Dimitris Melas

    Factors , Factor Investing

    Learn More

    Large U.S. technology companies, the so-called FAANG, dominated the U.S. stock market in the last few years and had a significant impact on many investment strategies. These companies have been underrepresented in most factor-based strategies due to their unattractive factor characteristics. Have factor investors suffered from not investing in these stocks?

  64. BLOG

    Understanding Factor Exposures When Markets Become Volatile 

    Feb 9, 2018 Anil Rao

    Factors , Factor Investing

    Learn More

    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.

  65. BLOG

    Creating a common language for factor investing 

    Jan 18, 2018 George Bonne

    Factor Investing

    Learn More

    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.

  66. BLOG

    Improving stock selection in the age of big data 

    Nov 20, 2017 Oleg Ruban

    Factors , Factor Investing

    Learn More

    In the age of big data, fundamental stock pickers face a major challenge. Stock selection typically depends on establishing research conviction in the operating models of companies, such as identifying inexpensive businesses that demonstrate sustainable competitive advantage, disciplined capital management and strong corporate governance. The stock picker’s edge may rely on analyzing information and top-notch research skills.

  67. BLOG

    Using factors in international investing 

    Nov 8, 2017 Anil Rao

    Factors , Factor Investing

    Learn More

    Over the last decade, asset owners have implemented factor investment programs with a focus on domestic markets. Increasingly, they are also funding equity factor programs in international markets. Two catalysts are driving this trend. First, there has been a steady erosion in asset owners’ home biases, leading to more indexed and active international mandates. Second, investment committees and boards of trustees have become more comfortable with using factors as a complement to core indexed and traditional active allocations.

  68. BLOG

    Integrating ESG criteria into factor index construction 

    Sep 27, 2017 Stuart Doole

    Factor Indexes , ESG Research , Factors , Factor Investing

    Learn More

    Institutional investors increasingly are moving toward integrating ESG criteria into their portfolios and their factor allocations, in particular. This shift is driven by their recognition of the financial relevance of ESG issues to their risk management and their focus on long-term sustainable investing.

  69. BLOG

    Why Are Small Caps Different? 

    Sep 18, 2017 Raina Oberoi

    Global Investing , Factor Investing

    Learn More

    A lot has been written about the persistence of the global small-cap premium. But what, apart from size, distinguishes small-cap stocks from their large- and mid-cap counterparts, and how can these distinctions help institutional investors?

  70. BLOG

    Downside protection? Fear of extreme events rises further 

    Sep 13, 2017 George Bonne

    Factors , Factor Investing

    Learn More

    In May, we wrote that despite the generally low market volatility that has prevailed this year, investors were paying relatively high prices for downside protection as measured by “options skew” – the difference in implied volatility between an out-of-the-money option and an at-the-money option. High skew levels indicate heightened fears of “tail risk” – the chances of unlikely but highly consequential events that could sink share prices. Low market volatility largely continued through the summer, but how has options skew behaved – has it fallen to more “normal” levels?

  71. BLOG

    Time to Revisit Fundamentals of Quality? 

    Jul 19, 2017 Hitendra D Varsani

    Factor Investing

    Learn More

    We have seen substantial rotation in factor index performance in the past 12 months. Value, the best-performing equity factor index in the second half of 2016, was the worst performer in the first six months of 2017.

  72. BLOG

    Measuring the Impact of Factors 

    Jul 12, 2017 Leon Roisenberg

    Factors , Factor Investing

    Learn More

    In constructing portfolios, asset managers expose the portfolio to factor tilts that greatly influence fund performance. Some of these exposures, which can provide sources of excess return, may be intentional but others may not. A manager who makes the wrong bet could be on the wrong side of history.

  73. BLOG

    Global small-cap fund capacity: no small matter 

    Jun 15, 2017 Raina Oberoi

    Global Investing , Factor Investing

    Learn More

    In recent years, pension funds around the world increasingly have shed their home bias and made global small-cap allocations.

  74. BLOG

    Fearing black swans, investors eye options 

    Jun 2, 2017 George Bonne

    Factors , Factor Investing

    Learn More

    It’s been widely reported that equity-market volatility, outside of a mid-May spike, has been oddly low given investor concerns that range from North Korean saber-rattling to the fate of tax cuts proposed by the Trump Administration.

  75. BLOG

    Integrating Factors in the Investment Process: a Holistic Perspective 

    May 31, 2017 Oleg Ruban

    Factor Investing

    Learn More

    A growing number of institutional investors use factor insights in constructing portfolios, managing risk or allocating capital. However, few investors have adopted a holistic approach to factor investing.

  76. BLOG

    An Opportunity in Abenomics? Human and Physical Capital 

    Mar 30, 2017 Chin Ping Chia

    ESG Research , Factor Investing

    Learn More

    Since Prime Minister Shinzo Abe took office in 2012, he has embarked on a series of economic revitalization policies aimed at jostling Japan out of its so-called “lost decades,” the long period of sluggish growth and recurring deflation that followed the collapse of the country’s 1980s bubble economy

  77. BLOG

    Why global small-cap stocks are becoming an important part of institutional portfolios 

    Mar 16, 2017 Raina Oberoi

    Global Investing , Factor Investing

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    Institutional investors worldwide traditionally have tended to focus on the stocks of larger companies, finding them less risky, more liquid and offering greater investment capacity than small-cap stocks. But asset owners and managers increasingly are allocating strategically to the small-cap equity segment as part of their global equity portfolios i.e., via an “all-cap” approach.

  78. BLOG

    Separating facts from fiction in passive investing 

    Sep 26, 2016 Dimitris Melas

    Factor Investing

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    For institutional investors, float-adjusted market capitalization weighted indexes remain the tools of choice to implement their passive allocations. Such indexes are used widely as policy and performance benchmarks and as the basis for ETFs and other passive vehicles. Is this use justified or even appropriate? Do benchmark indexes suffer from shortcomings that undermine their suitability in implementing investment strategies?

  79. BLOG

    Fighting Marxism with smart beta 

    Sep 26, 2016 Remy Briand

    Factor Investing

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    The latest salvo in a long-running war of words between active and passive managers came recently from AllianceBernstein in a paper titled “The Silent Road to Serfdom: Why Passive Investing Is Worse Than Marxism.” The paper, which argues that passive investing misallocates capital, reminds me of a round of arguments a few years back between David Smith of the U.K.-based advisory firm, Hargreaves Lansdown, and Jack Bogle, the founder of Vanguard, in which each argued that active or passive managers are parasites.

  80. BLOG

    How to think bigger about small cap investing 

    Jul 15, 2016 Raman Aylur Subramanian

    Global Investing , Factor Investing

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    Investors who allocate to small-cap stocks can use either a benchmark weighted according to the market value of companies that constitute it or indexes that track the performance of factors such as size. But all small-cap indexes are not the same.

  81. BLOG

    Using Systematic Equity Strategies 

    Apr 18, 2016 Dimitris Melas

    Factor Investing

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    Top-down managers assess the economic outlook and translate macro views into country and industry portfolio positions. In contrast, bottom-up managers select securities based on a set of common criteria, for example valuations, profitability, growth, quality, yield, as well as company-specific attributes.

  82. BLOG

    Is momentum crashing? 

    Apr 8, 2016 Dimitris Melas

    Factor Investing

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    Momentum, the tendency of past winners to continue to do well in the near future, is a pervasive return regularity in equities and across asset classes. It is used both as a signal in alpha models and as a factor in risk models.

  83. BLOG

    One Size Does Not Fit All 

    Mar 30, 2016 Raman Aylur Subramanian

    Factor Investing

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    The size premium has been widely used in asset allocation and in risk models for decades. However, some academics and practitioners have refuted the validity of the size premium.

  84. BLOG

    How oil prices may impact your portfolio 

    Mar 29, 2016 Raghu Suryanarayanan

    Factor Investing

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    The falloff in the price of a barrel of oil that began in June 2014 has highlighted how such fluctuations can affect economies and asset prices worldwide.

  85. BLOG

    Seeking defensive yield in emerging markets and Asia 

    Mar 22, 2016 Chin Ping Chia

    Factor Investing

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    As we highlighted in a recent post, minimum volatility strategies have outperformed this year to date amid unrest in financial markets.

  86. BLOG

    How Brexit may impact your portfolio 

    Mar 21, 2016 Thomas Verbraken

    Factor Investing

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    Britain’s leaving the European Union would send the U.K. and Europe into the unknown with possibly major consequences for multi-asset class portfolios.

  87. BLOG

    Multi-factor strategies highlight benefits of diversification 

    Mar 14, 2016 Dimitris Melas

    Factor Investing

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    The cyclicality of factor strategies means that individual factors can deliver a premium against the market over time but that any one factor can experience periods of underperformance.

  88. BLOG

    The value factor marks a decade of disappointment 

    Mar 9, 2016 Remy Briand

    Factor Investing

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    Call it a lost decade. The value factor recently marked 10 years of decline in the U.S.

  89. BLOG

    How smart beta has performed amid the volatility 

    Feb 16, 2016 Remy Briand

    Factor Investing

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    The fitfulness of the global recovery has produced quick and unexpected changes in financial markets and handed portfolio managers the challenge of allocating assets amid the market stress.

  90. BLOG

    Constructing Low Volatility Strategies 

    Jan 25, 2016 Dimitris Melas

    Factor Investing

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    Low volatility is one of the few factors that have historically performed well in turbulent markets.

  91. BLOG

    RIDING ON MOMENTUM 

    Dec 15, 2015 Dimitris Melas

    Factor Investing

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    Momentum, the tendency of past winners to continue to do well in the near future, is used widely in risk models and in quantitative strategies. Recently, momentum has also been the basis for factor indexes aiming to replicate the performance of this pervasive factor.

  92. BLOG

    THE DIVIDEND YIELD FACTOR: DEFYING CONVENTIONAL WISDOM 

    Dec 15, 2015 Zhen Wei

    Factor Investing

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    Ever since central banks slashed interest rates in response to the Global Financial Crisis, investors have been searching for yield.

  93. BLOG

    FLIGHT TO QUALITY 

    Sep 21, 2015 Chin Ping Chia

    Factor Investing

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    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.

  94. BLOG

    MULTI-FACTOR INDEXES MADE SIMPLE 

    Jun 24, 2015 Chin Ping Chia

    Factor Investing

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    Institutional investors are increasingly gravitating towards multi-factor allocations as the preferred approach to factor investing. But how should factor indexes be combined?

  95. BLOG

    CAN ALPHA BE CAPTURED BY RISK PREMIA? 

    Jun 16, 2015 Brett Hammond

    Factor Investing

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    Traditional investment thinking posits that alpha depends on the active decisions of portfolio managers. The search for alpha is daunting, however, because even the best analysis can be upended if the market draws a different conclusion. In addition, geopolitical and macroeconomic events can change the market environment without warning.

  96. BLOG

    USING SYSTEMATIC EQUITY STRATEGIES TO BUILD BETTER PORTFOLIOS 

    Apr 23, 2015 Mehmet Bayraktar

    Factor Investing

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    Systematic Equity Strategies, when represented as factors in risk models, allow investment managers to better monitor the sources of risk and return in equity portfolios. We believe that they also improve forecast accuracy and help construction of portfolios that tilt towards (or away from) these strategies, which are rules-based or computer-based implementations.

  97. BLOG

    SELECTING THE RIGHT BLEND OF FACTOR INDEXES 

    Dec 9, 2014 Dimitris Melas

    Factor Investing

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    Many institutional investors have struggled to determine the appropriateness of factors for their own plan, what role these allocations might play, which factors should be adopted and how factor indexes can be used.

  98. BLOG

    HARVESTING RISK PREMIA FOR LARGE-SCALE PORTFOLIOS 

    Dec 2, 2014 Remy Briand

    Factor Investing

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    While a growing body of research shows that exposure to factors, such as Value, Momentum, Low Size and Low Volatility, has produced positive excess returns, factor investing for large-scale portfolios has not been well studied.

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