Alternative factor specifications, security characteristics, and the cross-section of expected stock returns1We are especially grateful to Eugene Fama (a referee), an anonymous referee and Bill Schwert (the editor) for insightful and constructive suggestions. We also thank Wayne Ferson, Ken Frenc... (original) (raw)

Primer on Factor Exposures and Payoffs

Given the popularity of factor investing, also known as rules-based, "smart beta", or simply quantitative portfolio management, a number of students and traditional equity analysts have asked for a primer to introduce basic terms, concepts, and calculation procedures. This guide to factor exposures and payoffs contains material from our journal publications over the last several years, compiled in a way that provides a quick start and somewhat self-contained guide to analysts that are new to factor investing. We include specific empirical results that can be replicated as an exercise in data collection, programming, reporting, and analysis.