TY - JOUR T1 - Understanding Style Premia JF - The Journal of Investing SP - 15 LP - 22 DO - 10.3905/joi.2014.23.4.015 VL - 23 IS - 4 AU - Ronen Israel AU - Thomas Maloney Y1 - 2014/11/30 UR - https://pm-research.com/content/23/4/15.abstract N2 - Four investment “styles”—Value, Momentum, Carry, and Defensive—have emerged as compelling sources of alternative returns, backed by economic theory and decades of data across geographies and asset groups. When applied as long/short strategies, these styles have delivered positive long-term returns across multiple asset groups and markets, with low correlations to other investments.Equity and bond premia are often considered to be the most reliable sources of long-run investment returns, but investors may be relying on them too much. We argue that sustained investment success involves cost-effectively harvesting multiple, independent sources of returns, including long-only market premia (such as stocks and bonds) and alternative risk premia, including hedge-fund risk premia and style premia.Evidence in favor of styles has existed in academia for some time, but styles have rarely been pursued in their purest form, as a multi-asset, market-neutral, multi-strategy investment. As a result, investors often view each style premium separately and fail to appreciate the potential diversification benefits of combining different styles. Just as multi-strategy alternatives seek to benefit from diversification, so can multi-style alternatives benefit in the same way.TOPICS: Style investing, portfolio construction ER -