Seek outperformance Seek to reduce risk
Factor
Value
Quality
Momentum
Low volatility
Objective
Seeks to invest
in stocks that are
inexpensive relative
to fundamentals.
Seeks to invest in
stocks with sustainably
high profitability and
healthy balance
sheets.
Seeks to invest in
stocks with improving
earnings and price
trends.
Seeks to invest in stocks
with stable price and
earnings profiles.
Behavioral
foundation
Mean reversion
in prices due to
investor overreaction
as a result of loss
aversion or liquidity
preference.
Stable compounding of
prices due to investor
tendency to overpay for
lottery-like outcomes.
Trend in prices due
to investor under-
reaction as a result of
anchoring.
Risk reduction via stocks
with more stable return
profiles and/or lower
correlation to the market.
Historical hit rates of factor outperformance
We prefer profitable companies (quality), with strong earnings
momentum, at a discount to their fair valuation (value).
Description: A hit rate refers to the percentage of rolling periods that a specific factor's return
exceeded the return of a benchmark index. This chart shows the percentage of rolling periods in
which each of the factors–value, quality, and momentum–outperformed their relative counterparts.
The analysis covers 1-, 3-, 5-, and 10-year periods and uses data from July 1964 to June 2024.
Source: Analysis using Ken French Data Library as of 6/30/24. Data from July 1964 through June
2024. Value represented by HML (high book-to-market minus low book-to-market). Quality
represented by RMW (robust minus weak). Momentum represented by MOM (high prior returns
minus low prior returns). Counterparts for value, quality, and momentum are higher priced stocks,
less profitable stocks, and downward trending stocks.
-year -year -year -year
Value
Quality
Momentum
4
