Investing with style - AQR

https://www.aqr.com/library/journal-articles/investing-with-style

1. Most existing portfolios, even seemingly diversfied ones, are dominated by equity risk.
  - EX> 60/40 Stock/bond portfolio is 0.99 correlated to a 100% stock portfolio.

2. 전통적인 자산 고유의 수익률이 매우 낮아져 있다. Consequently, investors have turned their attentions to alternative sources of return, specifically those attempting to be uncorrelated with traditional assets.

3. One way to achieve uncorrelated returns is to seek pure "alpha"
  - In theory, alpha is the extra return achieved beyond any known risks or common systematic strategies. .... Unfortunately, alpha is at best elusive and, more often than not, illusive.

4. 알파를 찾는 어려운 일에 대한 이야기는 제쳐 두고, 이 페이퍼에서는 "Style" 이라고 부르는 기존 자산과 상관관계가 없고 positive return 을 만드는 충분히 입증된 전략에 대해 이야기를 해보자.

5. Def of Style
  - We define a style as a disciplined and systematic method of investing that produces unique long-term positive returns across markets and asset classes, with low to zero correlation with major long-only assets, backed by significant scientific evidence, both in- and out-of sample, and with strong economic intuition underlying it

6. 이것저것 찾아내려고 많은 사람들이 도전을 했고 나름 많은 것들을 발견했으나 DATA-MINING 의 한계에서 벗어나지 못한 것들이 대부분이다. 그러나 많은 정교한 테스트들을 통과한 Style 들이 있으니 그건 바로 value, momentum, carry, and defensive

7.  이 네개의 팩터를 이용해서 펀드를 만들었는데 다른 유명한 두 팩터인 size 및 illiquidity 팩터를 뺀 이유
- size : 수익이 robust 하지 않다. & Size cannot be easily applied across other asset classes such as currencies or commodities and entails betting to a large degree on less ilquid securies
- illiquidity

8. Identifying robust return sources is the first ingredient of successful style premia investing, and finding consistent evidence in many markets and asset classes achieve this aim.

9. Leverage, shorting, and derivatives are necessary to achieve these important objectives efficiently. Hence, putting together a portfolio of style premia requires careful portfolio design, proper portfolio construction, effective implementation and cost control, as well as sound risk management.

10.