Hello all,
Not sure if everybody is following the podcasts, but for those who listened to this particular episode how is your conviction about factor investing?
My main conclusions:
1) Publication bias: everyone want interesting things to read. According that, the sample chosen might indicate data mining, which can not be aligned with the out sample.
2) Premium decay: arbitrages occurred already on the past due exchange of information, but now our capacity to share, analyse and execute everything has over escalated. So, lets say that the reaction to arbitrage is much faster.
Well, I am also reading the “Complete Guide to Factor-Based Investing” of A. Berkin and L. Swerdoe. Even if the premiums have gone, we might profit from diversification, mostly in small cap.
Current portfolio:
70% FTSE All World
12,5% Msci World Sector Neutral Quality
12,5% Msci World Momentum
5% Small Cap Value
I am not sure if I will keep it or go simple like:
70% FTSE All World
30% Nasdaq 100
Thank you.