Factor-based equity has become increasingly popular in recent years, and for good reason: It works over time, especially in down markets.

I wrote an article on this point last year, specifically about reinterpreting the classic “Callan chart” by showing the performance of equity factors instead of asset classes. The revised chart had two important twists.

First, it showed relative performance (versus the overall stock market) instead of absolute performance. Second, it showed the strong probability of positive relative returns over time. As a single picture, it’s extremely compelling evidence that factors worked in the stock market, at least over the last two decades.

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