MULTI-FACTOR MODELS 101

Top-Down vs Bottom-Up

FactorResearch publishes a white paper on building multi-factor models.

SUMMARY

  • Three common approaches for creating multi-factor portfolios are the Combination, the Intersectional and the Sequential models
  • The results from the Combination and Intersectional models are comparable in terms of trend
  • Each model has its own advantages and disadvantages, the selection will depend on investor preferences
Combination vs Intersectional Model

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