What’s cheap, what’s expensive?
SUMMARY
INTRODUCTION
Cliff Asness of AQR Capital Management has been vocal for several years about traditional equity factors – like value – trading at historically cheap levels. More recently, a team at Research Affiliates echoed a similar sentiment, noting that many smart beta strategies appear attractively priced, stating, “we expect nearly every investing style featured here to outperform.”
But how do we determine whether a factor is cheap or expensive?