globalen

Risk factor

In factor investing, the term 'factor premium' can be replaced with 'risk factor' or 'risk premium', on the supposition that a factor premium represents compensation for higher risk.

However, the question remains as to whether the premiums actually represent compensation for higher risk or whether other aspects also play a role. If the first is true, the term risk factor is appropriate. This is in line with the belief in an efficient market, where returns and risk go hand in hand.

However, Robeco prefers the term 'factor premium', as it is not always necessary to take more risk to earn such premiums. The most familiar example is the low-volatility factor (low vol). While investors actually take less risk using this factor, the returns they can expect match the market.

Quantitative investing
Quantitative investing

We’ve been leading the way in quant investing for over 25 years, turning research into practical solutions.

Read more
Solving the sustainable investment dilemma
Solving the sustainable investment dilemma
Combining quant and sustainable investing efficiently requires expertise.
25-05-2020 | Interview
Value ain’t dead
Value ain’t dead
Value stocks have underperformed growth stocks over the past decade.
20-05-2020 | From the field
Podcast: Some factors are more equal than others
Podcast: Some factors are more equal than others
Is Value broken?
14-05-2020 | Podcast
Logo

Disclaimer

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