Factor timing: scant upside, big downside
Stock selection trounces “tempting” factor timing in study
Factor timing, which has intrigued asset managers for decades, landed squarely behind stock selection as a source of high-wattage returns in a recent AllianceBernstein study.
The process – where managers try to dynamically adjust allocations to factors such as value, growth and momentum over time – underperformed funds using other strategies. In the study, stock selection dominated: 45% of the excess returns at a typical manager came from stock selection; 30% from tactical timing; and 25% from
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