If I was an index investor

Investing / Others
246

Me neither.

Massive, Mirager-style contempt on Nobel prize winners incoming, avert your eyes!!! I’d logically expect only Value to represent misspriced stocks, and for my probably small but certainly confident brain it’s the one along with Quality (which sort of a blend) that makes logical sense enough to put money against. The rest seem more like “big herd good”, “big/fat buffalo stronk”, “small buffalo fast, no eat lion”.

I wonder if factor investing can readily and reliably be done by indices, or it needs really in-depth studying. That said, I don’t know, most probably Direxion etc have some sophisticated algorithm, maybe MSCI do too.

P.S. the Nobel prize shouldn’t include subjective arts and humanities like economics, literature and politics. :face_vomiting:

P.S.2 sorry, was ill for two days with a stomach bug, I think it’s now affected my typing :stuck_out_tongue:

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250

I think it has something to do with priced risk & idiosyncratic risk. I am not an expert either.

But I still think that such factors can only deliver if they are unknown. If everyone knows about these factors , why should this remain a way to create alpha.

I might be wrong but I think all these factors are more about understanding them to explain historical results rather than consistently creating a higher return portfolio.

251

Factors are not about idiosyncratic risk. Idiosyncratic risk, is the risk that is specific to an individual company or stock, such as the risk of a company-specific event or a change in management.
The extra risk in a factor is not idiosyncratic but systematic → cannot be diversified away.

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252

You might be surprised, but there is actually no Nobel prize in economics. There is an award by the swedish imperial bank in honor of Alfred Nobel. Someone can one day establish a complete troll award and also dedicate it to Nobel. Doesn’t cut it for “a Nobel prize in philately” though.

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