Faktorinvestering: En analyse af den historiske udvikling og en vurdering af den fremtidige

Christoffer Bisbo

Student thesis: Diploma thesis


The purpose of this paper is to evaluate and examine the historical development in returns, risk and correlations of certain style factors. The goal of the performance analysis is to shed light on the actual development of factors, but also to assess whether the arguments for factor investing can be supported. In order to do so, I will compare the original Fama French factors HML, SMB, RMW, CMA and Momentum to MSCI Factor Indexes; Value, Quality, Growth, Low Vol., Momentum and ESG. Based on the performance analysis, the geopolitical environment and the macroeconomic development, I will also attempt to forecast which factor I believe will perform the best in the near future. Based on the performance analyses, I can conclude that the Fama French factors has experienced a steep decline in performance since the introduction of them – none of them has outperformed the market since 2003. The MSCI Indexes, however, has not experienced this decline due to the construction of these compared to the Fama French factors. Overall, the arguments behind factor investing, if constructed in the same manner as Fama French, cannot be supported since they do not deliver excess returns and the low correlations appear to be more synthetic rather than real. With the recent changes in economic activity, the political shift in America, and the conclusions of the performance analysis, I believe that the Value-factor will be the highest performer on a short term. The ESG-factor, however, seems to be in for the long run, and I expect this to be a factor in high demand for the next many years. The Quality-factor has been the most robust and best performer since the creation of it, and I believe it will continue to deliver decent results however, for the foreseeable future, I believe Value and ESG will outperform it.

EducationsGraduate Diploma in Finance, (Diploma Programme) Final Thesis
Publication date2021
Number of pages94