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
IN THIS EPISODE, YOU’LL LEARN:
02:38 - What are the factors?
05:11 - The history behind where factors came from.
08:19 - Why exposure to factors leads to higher expected returns over the long run.
18:00 - How to get exposure to factors in your portfolio.
And much, much more!
*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.
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