Excess Returns, Ep. 24: The Pros and Cons of Factor Timing

We are all trained to buy low and sell high, and it is tempting to conclude that we can do the same thing with factors. But the research suggests that factor timing strategies are extremely difficult to implement in practice. In this episode, we discuss the pros and cons of factor timing and look at some of the approaches that investors can use to time factors.

We discuss:

  • Why most investors should avoid attempting to time factors
  • The common factor timing approaches, including value, momentum, macroeconomic and dispersion
  • Why the ability to control your emotions plays a major role in the ability to successfully time factors

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Show Notes:

Jack’s article on Factor Timing:

Research Affiliates Factor Timing: research, “Timing “Smart Beta” Strategies? Of Course! Buy Low, Sell High!

AQR’s take on factor timing, “Contrarian Factor Timing is Deceptively Difficult