MI219: Factor Investing 101 (Mini-Episode)
The Intrinsic Value Podcast - The Investor’s Podcast Network
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Why Do Small Cap Value, High Profitability, Low Investment Characteristics Lead to Higher Returns?
In two thousand and 14, famand french came up with their own five factor model which included market risk, size, relative price, profitability and investment. In 19 97, mark carhart introduced momentum as another factor. And to day, many academics also recognize momentum as a factor that will lead to higher expected returns over the long run. With this new five factor model, they found that you can explain almost 100 % of the differences in returns between stocks or diversified portfolios based on their sensitivities to the five independent factors. So now you might be wondering, what actually drives these factor premiums? Why do stocks with small cap value, high profitability, low investment characteristics lead to higher returns over
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