Factor Timing: Skepticism in Order

A Morningstar article posted last month discusses an “emerging body of research that suggests it is possible to successfully time exposure to factors like value, momentum, small size, quality and low volatility,” but adds that “a healthy dose of skepticism is in order.” The article explains that while such factors reflect a strong long-term record, an effective timing strategy could help to offset the inevitable stretches of underperformance. However, it notes that much of the… Read More

Factor Timing: Sin Less Than a Little

By Jack Forehand (@practicalquant) —   There is perhaps no issue that is the subject of more debate in the factor investing community than 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. For example, if value stocks have struggled for a long period of time and they are cheap relative to their history, it makes intuitive sense to… Read More

Asness versus Arnott: The Factor Timing Debate Continues

AQR Management founder Cliff Asness continues to argue that factor timing is “deceptively difficult,” contrary to what Rob Arnott of Research Affiliates would have you believe, says a recent article in Institutional Investor. Asness’ issue, the article says, is with Arnott’s contention that risk premia factors such as value, momentum, growth and volatility have become “overvalued as a result of the rising popularity of smart beta and factor investing strategies” and that investors should “time… Read More