Equity Factor Models

Multi-factors models are a leading portfolio management tool due to the pioneering work of Fama and French (1992) who showed that more than a single factor explained US equity market returns. Investors enhance portfolio value by either increasing return or reducing risk (as measured by variance in the time series of returns) to achieve portfolio efficiency (Markowitz, 1952). The growing integration of global markets suggests that country factors may
not be the singular driver of global returns and risk (Hau, 2011). Global factors
(e.g. crude oil, commodities, etc.) may provide a more fulsome picture of the return and risk drivers in the global markets.

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