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