Unit 3 · Level 4 · Factors & beyond the index
Review: the factor jungle
Value, momentum, quality and size are the four factors with real evidence, paid for with long stretches of pain. Beyond them stretches a zoo of data-mined mirages that die after publication. Active management can win in honest niches, but ~90% of funds trail over 15 years. And 'smart beta' is a tilt plus a fee wearing a clever name.
Free to play. No ads, no token, no account needed to start.
What you get asked
Final sweep: match each idea to its one-liner
One unit, four survival skills: name the tilt, doubt the backtest, respect the arithmetic, translate the brochure.
Why do many published factors stop working after publication?
Data mining plus arbitrage: the mirage evaporates and the oasis gets drunk dry. Post-publication decay is one of the best-documented facts in the field.
A factor premium is best understood as payment for enduring ___ that others refuse.
Years of lagging, scary stocks, unfashionable bets: if it felt good, everyone would do it and the premium would vanish. No pain, no premium.
Your bank pitches its 'AI-Enhanced Quality Dividend Leaders' fund at 0.85%/yr. Course-trained response?
The longer the name, the harder you interrogate the fee. Most multi-buzzword funds are plain tilts with expensive vocabularies.
After this whole unit, what does a plain world index fund still guarantee that nothing else does?
No zoo, no mirage, no marketing: just the whole haystack at cost. Everything beyond it must EARN its complexity. Unit 4: making the plan crash-proof. 🐜
The rest of this unit
Value, momentum, the factor zoo, and the marketing machine built on top.