Research shows that certain kinds of stocks have outperformed the broad market on a risk-adjusted basis over the past 50 years. These include companies that are undervalued or small, have consistently rising stock prices, are less volatile, or are efficiently managed and consistently profitable.
A select group of equity factors — value, small size, momentum, low volatility, dividend yield, and quality — has been the primary source of equity outperformance over the broad equity market for five decades. That should be exciting for investors, but the natural questions that follow are how and why? In fact, equity factors developed as a way to question the cornerstone beliefs behind passive investing.
Historically, style factors have been shown to deliver superior risk-adjusted returns to passive capitalization weighted indexes and more persistent performance than traditional active management, making them a compelling alternative for investors.
This Institutional Investor article highlights how the portfolio implementation of factors determines whether you are able to reap the benefits.
Investors — big and small — are grappling with a persistently low-growth environment. But that doesn't mean there aren't any good investments out there. See how we identify opportunities in this environment.