About NJ's Factor Book

NJ’s Factor Book is a manifestation of the relatively new and emerging world of factor investing, which is a confluence of technological advancements (data analytics, machine learning, and artificial intelligence) and established investment principles. NJ’s Factor Book takes you through the myriad facets of factor investing, ranging from the evolution of factor investing

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Preface

Most people accept that history is important and a knowledge of history is crucial to understanding the present and preparing for the future. In investing, a study of history provides crucial insights into market and investor behavior. However, to a large extent, studying this history has only been of interest to market experts who have used it to guide their investment decisions.

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What are Factors?

We all praise Sachin’s text-book style square cuts and master strokes, but is that enough to win matches for the Indian cricket team? Apart from Sachin’s quality batting, we also need Dhoni’s low-volatility advice, Sehwag’s strong scoring momentum, and Dravid’s valuable "wall"

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Value Factor

Value investing is synonymous with Benjamin Graham. In 1934, Mr Graham along with co-author David Dodd, published a seminal book called Security Analysis (Graham & Dodd, 2008). This book prescribed a formula to measure the intrinsic value of a company that was based

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Quality Factor

As a noun, the 'quality' of an item refers to how good or bad it is. In popular usage however, the word 'quality' has retained only positive connotations being used most often as a simile for "high quality". A "quality product" is assumed to be a high quality product and a "quality company"

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Momentum Factor

Why are runners unable to stop right after crossing the finish line? The force that is applied to move them towards the finish line builds momentum and keeps them moving in the same direction for some time even after the force ceases, which is explained by Newton’s first law of motion.

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Low Volatility Factor

As on February 20, 2022 the batsman with the best strike rate in men’s one day internationals is Andre Russell of the West Indies scoring 130.22 runs for every 100 balls faced.He is followed by Glen Maxwell of Australia (125.43) and Jos Buttler of England (118.66) (ESPN Sports Media

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Multi-Factor Investing

A successful team in cricket is often about the composition of the team rather than the individual star player. The relationship between single factor and multi-factor strategies is no different in this regard - the team is the combination of the individual factors into one multi-factor strategy.

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Factor Investing: The Road Ahead

The chart below depicts the global Google Search Trend for the word "Factor Investing" over the period January 2004 to January 2022. As visible, the interest towards factor investing over time has increased exponentially over the last couple of decades.

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