Factor Investing
Definition
An investment approach that targets specific, measurable characteristics (factors) that have historically explained differences in stock returns.
Explanation
Factor investing bridges active and passive management. Instead of picking individual stocks, investors tilt toward characteristics associated with higher returns: value (cheap stocks), momentum (recent winners), quality (profitable, stable companies), size (small companies), and low volatility. Academic research by Fama-French, Carhart, and others has identified these factors as persistent across markets and time periods. Stoquity's 24-factor scoring model is a systematic implementation of this approach, applied to every stock in the universe.
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