Factor Performance 2010–2019: A Lost Decade?

Abstract

The factors in the widely used Fama–French model experienced a negative average return during the 2010–2019 period. Perhaps surprisingly, such a lost decade is not unprecedented in history, as factor performance in the 2010s was, in fact, remarkably similar to factor performance in the 1990s. By contrast, many other factors did deliver a positive premium during the past decade. These factors include low risk, price momentum, earnings momentum, analyst revisions, seasonals, and short-term reversal. Thus, there appears to be a clear dichotomy in recent factor performance: while generally accepted factors struggled, various factors that are considered to be inferior or redundant remained effective.

TOPICS: Factor-based models, style investing, volatility measures

Key Findings

• • The factors in the widely used Fama–French model experienced a negative average return during the 2010–2019 period. This lost decade is remarkably similar to the 1990–1999 period.

• • Many other factors did deliver a positive premium during the past decade—for example, low risk, price momentum, earnings momentum, analyst revisions, seasonals, and short-term reversal.

• • In sum, there has been a clear dichotomy in recent factor performance: Although generally accepted factors struggled, other factors remained effective.