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For years, factor investing has demonstrated its potential to outperform the general market.

Investor sentiment in 2021 can be summed-up in one word: “concerned”. Generally speaking, investors know there are only a handful of events that can spark a turning point in a market cycle — and in 2021 most expected tapering to be one of them.

Analytics | Factor Investing
The Economy Is Stressed Enough, but Don’t Let it Stress Out Your Portfolio!
In this article we examine stress-test results to determine the ex-ante performance impact of the variables in the Axioma Worldwide Macroeconomic Projection Equity Factor Risk Model (Macro Model).

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.

Analytics | Portfolio Risk Management
After years of dateless Saturday nights, Value finally goes to the prom. But will it become Prom King?
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.

Analytics | Factor Investing
Wait a second… Is that style or economic impact? And what does it mean for performance?
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.

Analytics | Portfolio Risk Management
Oil-price swings pushing your equity portfolios around? Consider using an Oil Sensitivity metric…
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.

Analytics | Portfolio Risk Management
Liquidity and Leverage raise red flags for portfolio risk amid retail trading surge
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 theory 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 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.

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, and the return was the worst of any day going back to 1999, according to Qontigo’s medium-horizon models.

Analytics | Portfolio Risk Management
Stressed-Out Dividend Yield Strategies Could Leave Some Wiggle Room in Your Risk Budget
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.