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When Everyone Trades the Same Factor Playbook

alphaarchitect

2 months ago

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For decades, academic researchers have catalogued hundreds of patterns in the stock market — statistical regularities linking firm characteristics to future returns. These persistent return patterns, unexplained by standard risk models, are known as anomalies. They now form the intellectual backbone of a multi-trillion-dollar industry called factor investing, implemented through mutual funds, hedge funds, and ETFs worldwide.

The premise is straightforward: buy stocks with characteristics asso...

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