RESEARCH COMPENDIUM 2019

“Knowledge rests not upon truth alone, but upon error also” – Carl Gustav Jung

December 2019. Reading Time: Several hours. Author: FactorResearch.

RESEARCH COMPENDIUM 2019

In 2019 we published more than 50 research notes on mostly factor investing and smart beta ETFs, but also on topics like ESG, activist investors, hedge fund replication, and artificial intelligence. The Research Compendium 2019 contains all of our research published this year.

We would like to thank you for reading and always appreciate feedback, especially if critical.

BEST OF FACTORRESEARCH 2019

Our top five most-read research reports of 2019 are the following:

  1. Smart Beta vs Alpha + Beta
  2. Quant Strategies: Theory vs Reality
  3. Mapping My Mind: Value Factor
  4. Replicating Famous Hedge Funds
  5. Warren Buffet: The Greatest Factor Investor of All Time?

Further details on the top five:

SMART BETA VS ALPHA + BETA

  • Investment portfolios can be simplified by separating alpha from beta
  • Alpha + beta portfolios offer higher risk-adjusted returns than smart beta
  • The main hurdle for better portfolios is investor behaviour, not a lack of products

QUANT STRATEGIES: THEORY VS REALITY

  • The live performance of quant strategies is significantly worse than in backtesting
  • Factor investing returns from research are frequently challenged as being overstated
  • However, the performance of smart beta and long-short multi-factor funds match theoretical returns

MAPPING MY MIND: VALUE FACTOR

  • There is consistency in the performance of the Value factor across markets and asset classes
  • Allows to create a coherent framework of how to think about Value
  • Suggests a global driver of factor performance

REPLICATING FAMOUS HEDGE FUNDS

  • Diverse hedge fund strategies can be replicated via factor-mimicking portfolios
  • The analysis highlights that most returns are explained by factors, not alpha
  • However, hedge funds can create value by harvesting factor returns efficiently via portfolio construction

WARREN BUFFET: THE GREATEST FACTOR INVESTOR OF ALL TIME?

  • A factor exposure of Berkshire Hathaway reveals structural factor tilts
  • Long Value, Size, Quality, and Low Volatility factors and short Growth and Dividend Yield
  • Warren Buffet generated little alpha, but is highly skilled at harvesting factor returns

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