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
Mutual funds following factor investing strategies based on equity asset pricing anomalies, such as the small-cap, value, and momentum effects, earn significantly higher alphas than traditional actively managed mutual funds. The authors report that a buy-and-hold strategy for a random factor fund yields 110 basis points per annum in excess of the return earned by the average traditional actively managed mutual fund. However, they find that the actual returns that investors earn by investing in factor mutual funds are significantly lower because investors dynamically reallocate their funds both across factors and factor managers. Although factor funds have attracted significant fund flows over their sample period, it appears that fund flows have been driven by factor funds earning high past returns and not by the funds providing factor exposures. The authors argue that, rather than timing factors and factor managers, investors would be better off by using a buy-and-hold strategy and selecting a multifactor manager.
- © 2019 Pageant Media Ltd
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