Why have so many quantitative funds performed poorly in recent years? In his January 2021 paper entitled "The Quant Crisis of 2018-2020: Cornered by Big Growth", David Blitz examines in detail recent (June 2018 through August 2020) performance of stock portfolios constructed from five widely accepted long-short factors:
- Size - Small Minus Big (SMB) market capitalizations.
- Value - High Minus Low (HML) book-to-market ratios.
- Investment - Conservative Minus Aggressive (CMA).
- Profitability - Robust Minus Weak (RMW).
- Momentum - Winners Minus Losers (WML).
Using factor returns from the Kenneth French data library and additional firm/stock data for developed and U.S. markets to construct alternative factor performance tests from various start dates through August 2020, he finds that:
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