Patrick Caldon

With the growing popularity and accessibility of factor investments, it is important to analyze fund managers’ performance through the lens of factors. Do fund managers profitably time their exposures to risk factors? How much return comes from long-term positioning, as against short-term tactical changes? In this paper, we attempt to address these questions with a new multiperiod static-dynamic factor attribution methodology.

Morningstar's new static-dynamic attribution tool provides more insight into how well factor exposure adjustments were timed.

Morningstar has created a new volatility factor which exploits the low-risk anomaly. This new volatility factor is now in the Morningstar Risk Model, and we can see that it performs better than our old one.