By J.P. Morgan Asset Management via Iris.xyz
Yaz Romahi, portfolio manager and CIO for Quantitative Beta Strategies, explains his approach to security selection and the benefits of multi-factor screening.
How would you summarize your approach to security selection?
There are a number of sources of equity returns beyond growth itself. These include factor exposures such as value, size, momentum and quality (or low volatility, which is closely related). When creating a diversified factor portfolio, we seek to build up the constituents with exposure to these sources of return.
Our bottom-up stock filter scores each company based on a combination of these return factors to determine whether it is included in the index. These factors provide access to a broader, more diversifying source of equity returns. The low correlation of these factors to one another complements our risk-based diversification.
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