Ben and Cameron, which host the excellent Rational Reminder podcast, sit down with Jack Vogel and go through a laundry list of factor investing questions.

The topics discussed:

  • 0:27 Do long-only factor premiums survive transaction costs?
  • 2:28 Would the market impact of rebalancing a fund like MTUM also show up in the index?
  • 3:45 What are the capacity constraints for factors?
  • 5:32 What would AA do if you were close to maximum capacity for the strategies?
  • 6:32 How do you estimate the transaction costs for Momentum portfolios?
  • 8:25 Why are there so many models for transaction costs? Related AA Article: Factor Investing & Trading Costs
  • 12:54 Muted Cameron: What do you expect for prospective Momentum & Value Premiums after costs?
  • 15:56 Does this change when you’re pursuing diluted factor investing?
  • 19:14 How does the skewness concept translate to factor portfolio construction?
  • 22:35 Thoughts on Integrated vs ‘Separate then Combined’ portfolio construction?
  • 29:52 Followup on
  • 12:54 – If the factor premium is only an extra 1-2%, is it worth the extra cost for a DFA-style fund?
  • 31:24 Thoughts on index-tracking implementation vs active implementation of factor portfolios?
  • 35:35 Is there an optimal rebalancing frequency for factor portfolios?
  • 37:43 Should an investor increase their concentration or use margin etc. for higher expected returns?
  • 42:30 Should investors pursue factor timing?
  • 44:39 When does a 100% Momentum portfolio make sense? Does it ever make sense?
  • 46:49 What drives someone to ‘hate’ a specific factor investment approach?
  • 48:55 What would you tell someone that made money in Large Cap Growth, likes diversification, yet dislikes value
  • 50:50 What are the limitations of factor regressions in portfolio analysis?
  • 54:28 How do you choose the factors in a model to evaluate any given portfolio?
  • 56:28 Clarification of the above
  • 58:25 What is the difference between a factor and a characteristic?
  • 1:03:37 Does factor investing apply to emerging markets the same as the rest of the world?
  • 1:04:53 How to think about DIY trend-following to investing in a product’s trend following?
  • 1:07:14 What books on these topics would you recommend to dive deeper?
  • 1:08:28 Speak on Mom. and Value canceling when running a purely Mom & Value strategy using your products?
  • 1:09:48 What do you see differently from Wes?
  • 1:10:50 Has the industry become too much of a marketing machine around factors?
  • 1:12:20 What do you think about DeFi and crypto?
  • 1:18:33 Can factor strategies be applied to crypto?

Here is the full youtube video:

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About the Author: Wesley Gray, PhD

Wesley Gray, PhD
After serving as a Captain in the United States Marine Corps, Dr. Gray earned an MBA and a PhD in finance from the University of Chicago where he studied under Nobel Prize Winner Eugene Fama. Next, Wes took an academic job in his wife’s hometown of Philadelphia and worked as a finance professor at Drexel University. Dr. Gray’s interest in bridging the research gap between academia and industry led him to found Alpha Architect, an asset management firm dedicated to an impact mission of empowering investors through education. He is a contributor to multiple industry publications and regularly speaks to professional investor groups across the country. Wes has published multiple academic papers and four books, including Embedded (Naval Institute Press, 2009), Quantitative Value (Wiley, 2012), DIY Financial Advisor (Wiley, 2015), and Quantitative Momentum (Wiley, 2016). Dr. Gray currently resides in Palmas Del Mar Puerto Rico with his wife and three children. He recently finished the Leadville 100 ultramarathon race and promises to make better life decisions in the future.

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For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Third party information may become outdated or otherwise superseded without notice.  Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency has approved, determined the accuracy, or confirmed the adequacy of this article.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Alpha Architect, its affiliates or its employees. Our full disclosures are available here. Definitions of common statistics used in our analysis are available here (towards the bottom).

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