Harvesting Risk Premia

NBIM from Norway have a nice summary of the main market anomalies discussed on this blog:


The anomalies are size, value, momentum and volatility (beta).

Excess annual returns from value, small cap and momentum are 4%, 3% and 8% respectively:


While the low beta out-performance has been about 4%.


Returns for the 4 factors over the last 2 decades are also displayed graphically, with all except Value contributing to the current bull run.  Notice the large “momentum crash” during the last recession.


The paper also covers integrating the factors for a large portfolio (pension fund).  It is well worth reading for an overview on how professional money managers approach fund design.


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