TY - JOUR T1 - Facts about Factors JF - The Journal of Portfolio Management SP - 55 LP - 65 DO - 10.3905/jpm.2017.43.5.055 VL - 43 IS - 5 AU - Paula Cocoma AU - Megan Czasonis AU - Mark Kritzman AU - David Turkington Y1 - 2017/03/31 UR - https://pm-research.com/content/43/5/55.abstract N2 - The authors evaluate the merits of factor stratification as an alternative to asset stratification. Their analysis reveals that it is more challenging to use factors than assets as the building blocks for forming portfolios because factor covariances are less stable than asset covariances. Nonetheless, factor stratification may be advantageous for a variety of other reasons. It may be that certain factors offer risk premiums; or it could be that by decomposing a portfolio into a set of factor exposures, investors will discover unintended risks. And awareness of a portfolio’s factor exposures may help to explain its performance.TOPICS: Analysis of individual factors/risk premia, factor-based models, portfolio construction ER -