We publish historical series of returns on fundamental factors in the pricing of stocks and bonds of Russian public companies, updated on a regular basis. Our goal is to help conduct independent research on the pricing of financial instruments of Russian issuers, portfolio strategies and analysis of the efficiency of public offerings of corporate securities, mergers and acquisitions. The benchmarks of the Russian securities market that we calculated can be used for international comparisons of capital markets.
The specified data can be useful for university students when writing Term Papers and the Theses on the financial market, researchers and practitioners interested in developing new investment strategies and financial assets pricing.
In our experience, the absence of historical series of portfolio returns that use effects of company size, value and growth, momentum, liquidity and other fundamental factors, creates unreasonably high costs for researchers of various aspects of the financial market. We tried to solve this problem by publishing the historical series of factor returns with the disclosure of the methodology for their calculation and sampling data.
On factor investment
One of the most interesting practical applications of modern capital pricing models is factor investment.
It is a way of constructing portfolios based on the securities issue classification by their fundamental characteristics. On different time horizons such factors as company size; values of price/earnings (P/E) and price/book value (P/BV) ratios, dividend yield, the level of liquidity of stocks, etc., allow portfolio managers to allocate groups of stocks that can bring excess return. For bonds, these factors are duration, credit rating, liquidity, issue size, etc. Smart beta strategies are variants of factor investment, involving the portfolio construction based on fundamental indices, in which stocks are not weighted by the amount of capitalization, but according to their different fundamental indicators. The theoretical basis for factor investment is CAPM (Capital asset pricing model) and multivariate models that help identify factors for these portfolio investment strategies.
According to a survey of the 300 largest global financial companies conducted in 2018 by the American asset company INVESCO (Invesco Global Factor Investing Study, 2018), 16% of institutional investors in the stock market and 29% in the bond market at the present time use factor investment strategies regularly. By 60% of responders assume more active use of these portfolio management strategies.
In Russia, despite the growing interest in long-term savings, factor investment strategies are still poorly used in practices of portfolio management of mutual funds and private pension funds. This is partly due to the difficulties in conducting such study and insufficient empirical data.
On prospects of the project
We hope that our project can help promote the ideas of factor investment and other new ideas in the field of portfolio management in the internal market. As it is implemented, we intend to expand the list of disclosed factors and acquaint users with the most interesting studies in this area.