The pure form ones since that has the data and research behind it. QMOM is closest to Fama French equal weight mom index. And DFSV to FF SCV (with AVUV being close enough).It is much less clear that momentum or value strategies are actually independent risk factors that you receive compensation for. They may just be a data-mined artifact or a piece of a bigger puzzle that we can't see right now. And there's no consensus on how to implement these strategies. A lot of ETFs are not similar even though they are implementing a strategy called "momentum" or "value". Which one do you pick? Which one will deliver the premium? Will any of them deliver a premium after costs? Is the premium reduced post-publication?Exactly. To be clear, I wouldn't expect any guarantees, but I would expect to see periods where beta is faultering like in 2022 and the other assets are holding strong despite being long-only (and vice versa). It reduces the changes of buying any one style too high and getting trapped into a 10 year long wait til breakeven.You had it right. There is no perfect portfolio for some future period. Diversifying across different risk factors, if, momentum and value turn out to be risk factors with compensation post-publication, would not be the guarantee of outperforming you think it would be. That is because momentum and value, if they still work, have had long periods of underperformance compared to the market. We don't know what will happen in a future period but the way to get "monster" returns would be to concentrate yourself in what would do well over that period, which of course, we don't know. If my future self came to me in a time machine, he'd be telling me about the one stock that has 10000x returns, not what broad-asset classes with different risk characteristics to invest in. That is for someone hedging their bets so as to reduce the chances of a fat left tail.
If the AQR research is all undermined, then that would suck but it seems like a lot of people here are taking bets on that research stream (i.e. HFEA, NTSX, PSLDX, etc.)
Statistics: Posted by hiddenpower — Tue Feb 06, 2024 12:17 pm — Replies 14 — Views 636