We often talk about factor returns as a single percentage, similar to a broad index return. The measures are helpful to get a quick understanding, but do not reveal much about the underlying dynamics. A factor’s return (also called a spread) is derived by the difference in returns of the top-ranked stocks and the bottom-ranked. This is done by quantizing the stocks into equal groups of similar rankings, based on a certain metric. Deciles, quintiles, or quartiles are popular to use. A decile spread is the average return of stocks in the top decile (D1) subtracted by the average return of stocks in the bottom decile (D10).
- October 30, 2019
- September 19, 2019
What recently occurred in U.S. financial markets is nothing short of extraordinary when viewed through the lens of factor investing. While on the surface it appeared as if all were calm for the five trading days from September 4-September 10 with the S&P 500 Index rising by 2.56% and the Russell 2000 Index (small cap stocks) rising by almost 5%. Underlying this performance, however, were significant factor moves, at largely unseen levels of volatility, since the Great Financial Crisis in 2008-2009.
- January 10, 2019
2018 was a strange year, and not just because Baby Shark was playing on constant loop, or because everyone became mildly obsessed with a Netflix movie heavy on blindfolds during the holidays. As far as markets go, it was one of the only two years since 2009 that a multi-factor portfolio delivered a negative return. Global multi-factor portfolios have been positive 8 out of 10 years, including 2011 and 2015 when the MSCI World was negative. 2018 was the only year in the last decade that multi factor portfolios and stocks broadly were down at the same time.
- September 19, 2018
We recently sat down with Harin de Silva, Ph.D., CFA, President and Portfolio Manager at Analytic Investors, sub-advisor of the 361 Long/Short Equity strategies, to discuss low-volatility equity investing. Specifically, why a dynamic approach to investing is necessary given potential fluctuations in factors that can be present in global equity markets.