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Rising interest in factor performance

04 March 2021

Research Signals - February 2021

While investors focused on the early stages of economic recovery, supported by a three-year high in the J.P.Morgan Global Manufacturing PMI, rising US Treasury yields triggered a late-month global selloff in equity markets. The proposition of higher borrowing costs and inflation expectations affected relative sector performance and, in turn, factor performance for the month (Table 1).

  • US: Factors with high active exposure to the Energy and Financial sectors outperformed, including 2-Year Ahead EPS Growth and Book-to-Market, respectively
  • Developed Europe: Rational Decay Alpha and 24-Month Value at Risk captured respective trades favoring low momentum shares at the same time as high risk names
  • Developed Pacific: Book-to-Market remained a strong performer in Japan, with this trade, in addition to underperformance of Industry-adjusted 12-month Relative Price Strength, spilling over to the broader region
  • Emerging markets: Industry-adjusted 12-month Relative Price Strength outperformance was isolated to emerging markets

Table 1

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