Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Portfolio Management
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Portfolio Management

The Journal of Portfolio Management

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

Contrarian Factor Timing is Deceptively Difficult

Clifford Asness, Swati Chandra, Antti Ilmanen and Ronen Israel
The Journal of Portfolio Management Special QES Issue 2017, 43 (5) 72-87; DOI: https://doi.org/10.3905/jpm.2017.43.5.072
Clifford Asness
is managing principal of AQR Capital Management in Greenwich, CT.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: cliff.asness@aqr.com
Swati Chandra
is a vice president at AQR Capital Management in London, United Kingdom.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: swati.chandra@aqr.com
Antti Ilmanen
is a principal at AQR Capital Management in London, United Kingdom.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: antti.ilmanen@aqr.com
Ronen Israel
is a principal at AQR Capital Management in Greenwich, CT.
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • For correspondence: ronen.israel@aqr.com
  • Article
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
EMEA: +44 0207 139 1600

Abstract

The increasing popularity of factor investing has led to valuation concerns among some contrarian-minded investors, and fears of imminent mean-reversion and underperformance. The authors find that despite their recent popularity, the most common factors or styles are not, in general, markedly overvalued as measured by their value spreads. More broadly, tactical timing, whether of markets or factors, always seems to hold appeal for many. The authors look at the general efficacy of value spreads in predicting future returns to styles. At first glance, valuation-based timing of styles appears promising, which is not surprising because it is a simple consequence of the efficacy of the value strategy itself. Yet when the authors implement value timing in a multi-style framework that already includes the value style, they find somewhat disappointing results. Because value timing of factors is correlated to the standard value factor, it adds further value exposure—but does so intermittently and suboptimally compared to an explicit risk-targeted strategic allocation to value. Thus, tactical value timing can reduce diversification and detract from the performance of a multi-style strategy that already includes value. Finally, the authors explore whether value timing works better at longer holding periods or at extremes, still finding fairly weak results. They find that contrarian value timing of factors is, generally, a weak addition for long-term investors holding well-diversified factors including value, and specifically, it does not send a strong signal on stretched valuations today.

TOPICS: Analysis of individual factors/risk premia, style investing, portfolio construction

  • © 2017 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
PreviousNext
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Portfolio Management: 43 (5)
The Journal of Portfolio Management
Vol. 43, Issue 5
Special QES Issue 2017
  • Table of Contents
  • Index by author
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Portfolio Management.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Contrarian Factor Timing is Deceptively Difficult
(Your Name) has sent you a message from The Journal of Portfolio Management
(Your Name) thought you would like to see the The Journal of Portfolio Management web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Contrarian Factor Timing is Deceptively Difficult
Clifford Asness, Swati Chandra, Antti Ilmanen, Ronen Israel
The Journal of Portfolio Management Mar 2017, 43 (5) 72-87; DOI: 10.3905/jpm.2017.43.5.072

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Contrarian Factor Timing is Deceptively Difficult
Clifford Asness, Swati Chandra, Antti Ilmanen, Ronen Israel
The Journal of Portfolio Management Mar 2017, 43 (5) 72-87; DOI: 10.3905/jpm.2017.43.5.072
del.icio.us logo Digg logo Reddit logo Twitter logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • HOW RICH ARE FACTORS TODAY?
    • TIMING EACH STYLE ON ITS OWN
    • TIMING IN A MULTI-STYLE PORTFOLIO
    • COMPARISON WITH OTHER RESEARCH
    • CONCLUSION
    • APPENDIX A
    • APPENDIX B
    • ENDNOTES
    • REFERENCES
  • Info & Metrics
  • PDF

Similar Articles

Cited By...

  • Value versus Glamour Stocks: The Return of Irrational Exuberance?
  • Value and Interest Rates: Are Rates to Blame for Values Torments?
  • Deep Value
  • Fact and Fiction about Low-Risk Investing
  • European ETF Factor Exposures: Evidence from a Regression- and Holdings-Based Analysis
  • Multi-Factor Portfolios: A New Factor? Limits of the Static Approach
  • The Capacity of Factor Index Strategies: Assessment and Control
  • Craftsmanship Alpha: An Application to Style Investing
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • News
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Sign In
  • Update your profile
  • Give us your feedback

© 2022 Pageant Media Ltd | All Rights Reserved | ISSN: 0095-4918 | E-ISSN: 2168-8656

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies