Factor Olympics Q1 2021 

And the winner is…

April 2021. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • Q1 2021 featured a major factor rotation
  • Value & Size, the losers of previous years, are leading the scoreboard
  • In contrast, Momentum, Quality, and Low Volatility have generated negative returns


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 (read Factor Olympics 2020). 


Our factors are created by constructing long-short beta-neutral portfolios of the top and bottom 10% of stocks in the US, Europe, and Japan, and 20% in smaller markets. 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 (try Finominal’s Alpha Analyzer for a factor exposure analysis).

However, even a diversified factor portfolio has not been particularly attractive when reviewing the returns of an equal-weighted multi-factor portfolio over the last few years. This poor performance gives frequently rise to the question if factor investing has become structurally unattractive based on its popularity and associated capital inflows.

However, there is very little data that supports this argument. In fact, the Value factor is trading at a multi-decade low based on a fundamental valuation and can be considered cheap and uncrowded rather than expensive and crowded.