AQR Capital Management examines whether popular factor investing strategies have become overcrowded, overpriced, and potentially misunderstood. Clifford Asness pushes back against claims that non value factors are in bubble territory, arguing most timing signals remain weak and that diversification still matters more than factor rotation.
My Factor Philippic
AQR
Cliff Asness
Research
30 Pages
Key Takeaways
Moderate Factor Expensiveness: Momentum and BAB ranked in the 18th and 9th valuation percentiles, while value averaged the 63rd percentile, far below 2000-era extremes.
Weak Timing Evidence: The book to price factor showed just 6% valuation persistence over three years versus 62% for the broader market, limiting the usefulness of long horizon factor timing.
Richening Claims Challenged: Momentum’s regression adjusted return stayed near 4.7% versus a 4.8% simple average, undermining claims that long term factor returns mainly came from valuation expansion.
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