Education . Factor Models . 1 of 3 RupeeCase
You bought the value factor.
You got one leg of it.
5
The value premium in the textbook . long minus short . pp per year
vs
3
What a long-only fund can keep . the short side is off limits . pp per year
A friend forwarded a smart-beta value fund last week. The pitch quoted the premium from the textbooks, five points a year over the market. His fund had done maybe three over the index, and he thought it was broken. It was not. The premium in the textbook is a long-short spread. His fund can only own the long side. He got the half he was allowed to buy.