Constructing Equity Portfolios From Factors

This paper describes the behavior of a wide range of equity valuation, growth, profitability, and momentum factors and methods to screen those factors to identify companies to include in a lower turnover, long equity portfolio.

Most research on the topic of factors has been focused on strategies suitable only for hedge funds where a fund is long one group and short another group within a factor. The implications from this important area of investment research has rarely been applied to the construction of high net worth taxable portfolios. This paper describes how Autumn Wind Asset Management accomplishes just that.

Are Factor Returns Really Sector Returns?

This paper evaluates the behavior of a wide range of factors and proposes a methodology to determine the degree to which a factor’s returns are the result of sector exposures. Evidence shows the majority of factor performance can be explained by the sector weights. This has significant ramifications to hedge fund managers employing long/short strategies as well as long portfolio managers. Both types of managers are in a better position to deploy factor-based strategies if they understand the role sector plays in performance and risk.