Four expansive reads on factor investing

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I have four really incredibly insightful reads for you on factor investing. They are expansive posts on the topic, going beyond the usual “is smart beta good or bad” variety.

First up, courtesy of America’s favorite financial bloggers, a look at the future of factor investing, now somewhat derisively referred to as “smart beta”. Thanks to Tadas Viskanta for getting all of these viewpoints together in one place:

Finance blogger wisdom: smart beta bubble? (Abnormal Returns)

Corey Hoffstein at Newfound Research takes a look at one of the trickier aspects of multi-factor product creation – yes, it’s cool to mix momentum and value factors, but how do you keep the influence of shorter-term “premium maturities” from dominating the security selection process?

Beware Bad Multi-Factor Products (Newfound Research)

Morningstar’s ben Johnson nails down the trouble with betting on the “Quality” factor – no one actually agrees on what it is. Different quantitative investment shops have alternate metrics to measure “small” and “value”, but the disagreements about what constitutes quality are all over the map.

Finally, Michael Batnick has a masterpiece on his hands here – it’s easy for naysayers to trash smart beta just because it’s grown in popularity, but there is real merit in getting away from traditional market cap-weighting for indexes. Rob Arnott’s seminal RAFI index can be tracked back to 1962 and the results of having a fundamental orientation are pretty unf***withable.

Before You Trash Smart Beta… (The Irrelevant Investor)

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