Factor Olympics 2020

And the winner is…

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


  • Momentum has been the clear winner across markets in 2020
  • Value has been the laggard like in recent years
  • Low Volatility ended a 10-year fantastic run


We present the performance of five well-known factors on an annual basis for the last 10 years. We only present factors where academic research supports the existence of positive excess returns across market cycles and asset classes. Strategies like Growth might be widely-followed investment styles, but lack academic support to be considered a factor and are therefore excluded (read Factor Olympics Q3 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.

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 three years. This poor performance gives frequent rise to the question if the excess returns of common equity factors like Value have been arbitraged away due to too much money pursuing factor investing strategies. 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.