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Factor Investing: The Truth Has Many Shades

Scientific investing unfortunately isn’t that scientific.

Nicolas Rabener
10 min read
26 Apr 2021

SUMMARY

  • The data from Professor French has laid the foundation for factor investing
  • However, over time factor portfolio construction grew complex and with many nuances
  • Returns may look more or less attractive, which makes a weak foundation

INTRODUCTION

When I was growing up one of my favourite TV shows was The X-Files, which followed the lives of FBI Special Agents Fox Mulder (David Duchovny) and Dana Scully (Gillian Anderson) exploring paranormal events. For our younger readers, it was about aliens that had infiltrated human civilization, especially the military and security complex of the U.S. government.

Almost every episode ended with the tagline “The Truth Is Out There”. Today, I am spending a considerable amount of time conducting quantitative research and finishing my days thinking the same, “the truth is out there”, somewhere.

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