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Which Factors?
Multi-factor models have become an important tool for investors seeking for smoother returns and diversification effect. They ensure for investors long-term outperformance with a low active correlation among factors. Moreover, investors can build their own multi factor model as various approaches exist when it comes to combine these factors; it will depend on their investment belief, level of sophistication and knowledge about factors. Investors can also choose whether they will apply a simple equal weighting or a more dynamic weighting strategy. Among the various weighting methodologies, equiweighting factors seems to be the favored approach due to its ease of implementation and the Sharpe ratios generated compared to other methodologies. It is not only...
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