Factor Olympics 2023 Q1 

And the winner is…

April 2023. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • After a great 2022 for factor investing, this year has started negatively for all traditional factors
  • Perhaps this can be attributed to a revival of the growth theme as growth ETFs have outperformed again
  • Size performed best, low volatility worst 


We present the performance of five well-known factors on an annual basis for the last 10 years. Specifically, we only present factors where academic research supports the existence of positive excess returns across market cycles and asset classes. 


Our factors are created by constructing long-short beta-neutral portfolios of the top and bottom 30% of stocks. Only stocks with a minimum market capitalization of $1 billion are included. Portfolios rebalance monthly and transactions incur 10 basis points of costs. 


The table below shows the long-short factor performance for the last 10 years ranked top to bottom. The global series is comprised of all developed markets in Asia, Europe, and the US. Aside from displaying the factor performance, the analysis highlights the significant factor rotation in terms of profitability from one year to the next, highlighting the benefits of diversified exposure.

Last year was great for factor investing as most factors generated attractive returns. An equal-weighted multi-factor portfolio was up 7.5%, which was the best return over the last decade. Only small caps performed poorly as evidenced by the negative size factor.

In contrast, the first quarter of 2023 started exceptionally poorly for factor investing as all five factors produced negative returns with low volatility and cheap stocks performing worst. Small caps only marginally underperformed large caps. It is an almost perfect reversal of fortunes.