Quantitative • Factor Investing
Factor Investing: Momentum, Value, Quality & Size Frameworks
Fama-French multifactor models, quantitative factor definitions, and macroeconomic cycle factor rotation.
Author: CMD Wire Institutional Research
Updated: August 2026 • 6 min read
1. The Foundation of Factor Investing
Pioneered by Eugene Fama and Kenneth French, Factor Investing is a quantitative framework that attributes portfolio risk and returns to underlying macroeconomic and stylistic characteristics (factors) rather than individual stock picking.
2. The Four Primary Equity Factors
| Factor | Quantitative Definition | Macro Outperformance Environment |
|---|---|---|
| Momentum (MTUM) | 12-month minus 1-month trailing total return persistence. | Strong, persistent trending markets with low macro volatility. |
| Value (VLUE) | Low Price-to-Book (P/B), low P/E, and high dividend yield. | Early economic recovery, rising Treasury yields, and reflation. |
| Quality (QUAL) | High Return on Equity (ROE), low debt/equity, and stable earnings growth. | Late-cycle decelerations, high interest rates, and liquidity contraction. |
| Size (SIZE / IWM) | Small-cap market capitalization exposure. | Early-stage bull markets following steep Federal Reserve rate cuts. |