CHAPTER 24Styles, Factors, and Equity Benchmarks
DEFINING EQUITY STYLE1
To constitute a style of investment, an investment philosophy must be held in common by a group of investors. While the exact implementation of the philosophy may differ, the group shares a generally similar view about which factors determine stock prices and how best to outperform market averages. If a philosophy were unique to a single manager, it would more appropriately be called an investment “insight” that belonged to that firm alone.
The concept of equity styles emerged in the 1970s as analysts noted clusters of portfolios with similar characteristics and performance patterns. Groups of managers seemed to share certain ideas about the best way to succeed in investing. ...