This is the sensitivity of an asset's returns to market movements. The beta coefficient measures an asset's sensitivity to market fluctuations. A beta of 1 indicates the asset generally moves with the market. A beta greater than 1 suggests higher volatility than the market. A beta less than 1 implies lower volatility than the market.

High beta assets tend to work well during risk-on goldilocks and reflationary conditions when growth is accelerating. Lower beta is often better suited for more risk-off conditions such as stagflation or deflationary conditions.

The size factor focuses on the market capitalization of companies. Historically, smaller companies, or "small-cap" stocks, have exhibited different risk and return profiles compared to larger companies, or "large-cap" stocks.

• Small-Cap: Generally, companies with a market capitalization of under $2 billion have higher potential returns but also higher volatility.
• Mid-Cap: are companies with a market cap between $2 billion and $10 billion.
• Large-Cap: Companies with a market cap exceeding $10 billion are more stable but often with lower growth potential.

Small-cap stocks often outperform during economic expansions due to higher growth potential, but are often more volatile, making them riskier. They also may have less access to capital making them more vulnerable to economic downturns. Large-cap stocks are generally more resilient during economic downturns.

The value factor emphasizes the selection of stocks that appear undervalued relative to their intrinsic or fundamental value. By focusing on metrics such as price-to-earnings ratios, dividend yields, and book value, investors aim to capitalize on assets that are priced below their true worth. Proper fundamental analysis is imperative. It is important to avoid "value traps", as stocks that appear to be undervalued may actually be in financial distress.

Stocks that are undervalued compared to their intrinsic worth have historically offered better returns. Value stocks may underperform in strong bull markets where growth stocks dominate, but can provide a hedge against market downturns, as they are often more resilient.

Momentum, in simple terms, means assets that have performed well in the recent past are likely to continue to do well in the short term, and vice versa. Understanding the Momentum factor is essential for investors looking to capitalize on market trends and short-term asset price movements.

Momentum is often most pronounced over short periods, typically three to twelve months. Trend-following strategies are often used, buying assets with strong recent performance and selling those with weak performance.

Momentum strategies can offer substantial returns during strong market trends. Momentum as a style factor tends to perform well during goldilocks, reflation, and stagflationary periods, and performs poorly during deflationary periods.

Volatility is a statistical measure of the dispersion of an asset's returns. In essence, it gauges the degree to which an asset's price fluctuates over a specific period.

• Historical Volatility: Calculates the standard deviation of an asset's historical returns.
• Implied Volatility: is extracted from the pricing of options - it forecasts future volatility.
• Beta Volatility: measures how much an asset moves relative to the overall market.

Incorporating assets with varying levels of volatility can help to achieve a desired risk profile. In stable markets, high-volatility assets may offer better returns, while low-volatility assets can serve as a hedge during turbulent times.

Quality as a factor, focuses on companies that exhibit strong financial health and stability. Metrics such as profitability, debt levels, and operational efficiency are considered to identify high-quality assets. Companies with strong governance, profitability, and low debt levels are considered high-quality stocks.

Quality stocks generally offer lower volatility compared to the broader market. Quality tends to outperform in stagflation and deflationary environments when growth is slowing and lower quality, higher risk assets fall out of favor.