Disclaimer

Robeco Institutional Asset Management B.V. (Dubai office) is regulated by the Dubai Financial Services Authority (“DFSA”) and only deals with Professional Clients and does not deal with Retail Clients as defined by the DFSA.

Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports, which can be all be obtained free of charge at this website and at the Robeco offices in each country where Robeco has a presence.

Please confirm that you are a professional investor and/or institutional investor and that you have read, understood and accept the terms of use for this website.

I Disagree
The siren song of factor timing

The siren song of factor timing

26-04-2017 | From the field

Timing when to enter and exit factors seems to be the holy grail of quant investing. But while the academic literature contains a huge amount of evidence that each factors delivers a significant premium over the long run, data substantiating the benefits of factor timing are conspicuous by their absence.

  • David Blitz
    David
    Blitz
    PhD, Executive Director, Head of Quant Selection Research

However, openly admitting that there is very little empirical basis for attempting to successfully time factors such as value, momentum, low volatility and quality can backfire for an asset manager as it may be perceived as a lack of skill, especially since some companies claim to be able to do so successfully.

In this short paper* the author argues that investors should not expect much reward from factor timing, and that companies often overstate their ability to time factors in order to justify higher management fees. We applaud him for sticking his neck out in this manner and for the main part agree with his reasoning.

*Asness, “The Siren Song of Factor Timing aka Style Timing”, Journal of Portfolio Management, Vol. 42, No. 5, 2016, pp.1-6.

Stay informed on Quant investing with monthly mail updates
Stay informed on Quant investing with monthly mail updates
Subscribe
From the field
From the field

Our researchers publish many whitepapers based on their own empirical studies; they also follow quantitative research done by others.

Read all articles
Subjects related to this article are: