How Can A Strategy Still Work If Everyone Knows About It?

How Can A Strategy Still Work If Everyone Knows About It? by Cliff Asness, AQR

Some assert that once a strategy is “discovered” it can’t work anymore. Others, often implicitly, assume the future will look as wonderful as the past. Perhaps not surprisingly, we stake out a middle ground. We’re going to argue that certain well-known classic strategies that have worked over the long term will continue to work going forward, though perhaps not at the same level and with different risks than in the past.[1] We will focus on classic “factor”-type strategies.[2] Our favorites won’t shock anyone. They are things like value, momentum, carry and quality/defensive.[3] Of these, we’ll use value investing...