News & Research

Much has been written about the spectacular comeback of Value stocks. But has this also been reflected in the credit market? The steep rise of the Value factor from the Axioma Factor-based Fixed Income Risk Model over the past 14 months seems to suggest that the answer is yes.

After experiencing a period of steadily rising returns from 1982 through 2006, investing in “cheap” stocks has been out of favor since 2007. Granted, a few good quarters for the Value factor have popped up every now and again, but so have strings of poor performance, yielding a return of roughly 0% over the 13-year period ended September 2020.

The recent release of the Axioma Macroeconomic Projection Equity Factor Risk Model highlights the risk and return impact of economic variables on equity strategies. Quantitatively driven portfolios are usually constructed (and invested in) without considering the potential impact of big moves in economic variables.

The surge in oil prices since November 2020 has highlighted the challenges—and even opportunities—of measuring and managing the impact of swings in oil prices on portfolios.

The impact of Robinhood at al did not escape the attention of our risk models. The roles of Liquidity and Leverage as risk factors in the Axioma fundamental models has been in full display on the heels of the recent trading frenzy which sent previously unpopular stocks soaring in January, only to tumble in early February. Other typically “compensated” style factors, such as Volatility and Size, also had a significant reaction, resulting in an overall increase in style factor risk.

In capital markets investing, the greater fool theory1 states that an investor buying a risk asset, no matter its current valuation, can always find a “greater fool” to buy it later at a higher price. The theory rests on the subjectivity of valuations and the fact that beauty (the attractiveness of the investment) is always […]

The US market soared in November, producing one of the highest monthly returns since at least 1982. With regard to factor returns, the month started out fairly slowly. But things changed on November 9, when it started to look like the pandemic could end someday.  We wrote about the impact the news from Pfizer on […]

November 9 was a profoundly bad day for Momentum. In most regions we cover closely, Momentum’s return for the day was between seven and 10 standard deviations below expectations[1], and the return was the worst of any day going back to 1999, according to Qontigo’s medium-horizon models. The year-to-date return for Momentum in the US went from positive to negative overnight, but remained positive in other regions, albeit far lower.

Active strategies that tilt on dividend yield have suffered mightily during the Covid-19 pandemic. Dividend yield ETFs, for example, have strongly underperformed the broader US market, as investors lost confidence in companies’ ability to pay dividends. At the same time, the active risk of these ETFs has surged. Not surprisingly, Axioma’s Dividend Yield factor in […]

The US market hit an all-time high this week. So are we finally out of the volatility woods? Not by a longshot. While US predicted risk as measured by Qontigo’s short-horizon fundamental model has retreated substantially, it remains in the top decile of values relative to where it has been historically. It would have to […]

China’s weight may dominate Emerging Markets, but returns and risks have gone their own way. Emerging Markets in aggregate have not mirrored China’s recent equity-market gains. And while China’s risk has spiked, Emerging Markets’ risk has continued to fall. Chinese stocks rallied as Emerging Markets failed to report YTD gains Chinese stocks rallied for eight […]

Equity markets have mostly recouped the losses of the downturn that started in February of this year, but at different rates. Notably, the broad market Russell 3000 index ended the first half down just 3.5%, whereas the small-cap Russell 2000—unable to benefit from the strength in such names as Amazon, Apple, Microsoft, Tesla and others […]