@article {Israel15, author = {Israel, Ronen and Maloney, Thomas}, title = {Understanding Style Premia}, volume = {23}, number = {4}, pages = {15--22}, year = {2014}, doi = {10.3905/joi.2014.23.4.015}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Four investment {\textquotedblleft}styles{\textquotedblright}{\textemdash}Value, Momentum, Carry, and Defensive{\textemdash}have emerged as compelling sources of alternative returns, backed by economic theory and decades of data across geographies and asset groups. When applied as long/short strategies, these styles have delivered positive long-term returns across multiple asset groups and markets, with low correlations to other investments.Equity and bond premia are often considered to be the most reliable sources of long-run investment returns, but investors may be relying on them too much. We argue that sustained investment success involves cost-effectively harvesting multiple, independent sources of returns, including long-only market premia (such as stocks and bonds) and alternative risk premia, including hedge-fund risk premia and style premia.Evidence in favor of styles has existed in academia for some time, but styles have rarely been pursued in their purest form, as a multi-asset, market-neutral, multi-strategy investment. As a result, investors often view each style premium separately and fail to appreciate the potential diversification benefits of combining different styles. Just as multi-strategy alternatives seek to benefit from diversification, so can multi-style alternatives benefit in the same way.TOPICS: Style investing, portfolio construction}, issn = {1068-0896}, URL = {https://joi.pm-research.com/content/23/4/15}, eprint = {https://joi.pm-research.com/content/23/4/15.full.pdf}, journal = {The Journal of Investing} }