PT  - JOURNAL ARTICLE
AU  - Paula Cocoma
AU  - Megan Czasonis
AU  - Mark Kritzman
AU  - David Turkington
TI  - Facts about Factors
AID  - 10.3905/jpm.2017.43.5.055
DP  - 2017 Mar 31
TA  - The Journal of Portfolio Management
PG  - 55--65
VI  - 43
IP  - 5
4099  - https://pm-research.com/content/43/5/55.short
4100  - https://pm-research.com/content/43/5/55.full
AB  - The authors evaluate the merits of factor stratification as an alternative to asset stratification. Their analysis reveals that it is more challenging to use factors than assets as the building blocks for forming portfolios because factor covariances are less stable than asset covariances. Nonetheless, factor stratification may be advantageous for a variety of other reasons. It may be that certain factors offer risk premiums; or it could be that by decomposing a portfolio into a set of factor exposures, investors will discover unintended risks. And awareness of a portfolio’s factor exposures may help to explain its performance.TOPICS: Analysis of individual factors/risk premia, factor-based models, portfolio construction