RESEARCH: FACTOR CROWDING

HOW CROWDED ARE TECH STOCKS?

  • Equity crowding models can be applied to factors and sectors
  • Crowding leads to more frequent drawdowns
  • Tech sector¬†was crowded over the last 12 months

WHITE PAPER: FACTOR CROWDING MODEL

  • Crowded factors exhibit higher drawdowns than uncrowded factors
  • A multi-metric approach can be successfully applied to measure factor crowding
  • Effective in reducing factor drawdowns and volatility, but less meaningful for returns

MEASURING FACTOR CROWDING VIA VALUATIONS

  • Fundamental factor valuations can be used to identify factor crowding
  • However, the approach does not improve risk metrics
  • A multi-metric approach for identifying factor crowding is likely more successful
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