Primer on Factor Exposures and Payoffs

Given the popularity of factor investing, also known as rules-based, “smart beta”, or simply quantitative portfolio management, a number of students and traditional equity analysts have asked for a primer to introduce basic terms, concepts, and calculation procedures. This guide to factor exposures and payoffs contains material from our journal publications over the last several years, compiled in a way that provides a quick start and somewhat self-contained guide to analysts that are new to factor investing. We include specific empirical results that can be replicated as an exercise in data collection, programming, reporting, and analysis.