Invesco examines how major equity factors behaved through recent market cycles, focusing on their persistence, cyclicality, and diversification benefits across regimes. The paper highlights how factor leadership rotates more than most expect, with value lagging for extended periods despite long-term premiums, challenging the idea of consistent factor outperformance.
The Facts Behind Factor Performance
Invesco
Jason Stoneberg, Bradley Smith
Research
12 Pages
Key Takeaways
Factor Cyclicality Matters: Value underperformed growth by over 40% cumulatively in the 2017–2020 period, showing how prolonged drawdowns can test investor conviction despite historical premiums.
Diversification Reduces Drawdowns: Multi-factor portfolios reduced volatility by roughly 20% compared to single-factor strategies, smoothing performance across varying market environments.
Momentum Resilience Evident: During the COVID-19 selloff, momentum delivered positive returns while global equities fell nearly 30%, reinforcing its defensive characteristics in sharp downturns.
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