Whitepaper
Overview

For over three decades, a recurring topic among researchers and market practitioners has been cross-sectional returns of equity and other asset classes. Portfolio diversification has long been a popular safety tactic. That said, the gains of diversification can still be lost if all securities in a portfolio react to market conditions similarly. To get a good degree of diversification, portfolios should not be created just through a combination of different asset types, but instead by identifying the return drivers and creating specific exposures, which will work not just in homogenous conditions, but also through turbulent markets. Finance has always embraced non-black-box techniques, especially in the area of portfolio management. Factor investing is one such technique that rewards market beta portfolios for a given level of systematic risk.
There is already a large body of literature covering in breadth and depth the topic of factor investing. This paper summarizes the concept of factor investing already explored by various researchers. It is the growth of Exchange-Traded Funds (ETFs), specifically the rising popularity of smart beta ETFs that has brought the concept of factor investing – single and multi-factor – to the fore.

There is already a large body of literature covering in breadth and depth the topic of factor investing. This paper summarizes the concept of factor investing already explored by various researchers. It is the growth of Exchange-Traded Funds (ETFs), specifically the rising popularity of smart beta ETFs that has brought the concept of factor investing – single and multi-factor – to the fore.

What you will learn

Concept and Evolution of Factors
What are the different factors?
Potential Benefits of Factor Investing
What should you consider before adopting the Factor Approach?
Factor Investing – more than just a passing fad?

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