Scientific Beta

Funds Europe: "Felix Goltz of the EDHEC-Risk Institute charts how the main investment factors, such as value and momentum, have risen to prominence – aided by their relevance not just to US equities, but other markets too."

Funds Europe February 2016

"(…) Felix Goltz of the EDHEC-Risk Institute charts how the main investment factors, such as value and momentum, have risen to prominence – aided by their relevance not just to US equities, but other markets too. Asset-pricing theory postulates that multiple sources of systematic risk are priced in securities markets. The economic intuition for the existence of a reward for a given risk factor is that exposure to such a factor is undesirable for the average investor because it leads to losses in bad times. For example, while investors may gain a payoff from exposure to illiquid securities as opposed to liquid ones, such illiquidity may lead to losses in times when liquidity dries up and a flight to quality occurs, such as during the 2008 financial crisis. In such conditions, hard-to-sell (illiquid securities) may post heavy losses. While asset-pricing theory provides a sound rationale for the existence of multiple factors, theory provides little guidance on which factors should be rewarded. (...)"