In this episode of FTSE Russell Index Ideas, Sergiy Lesyk, director of research and analytics at FTSE Russell, looks at one of the classic equity market factors—value. He explains why value investors have faced a tough time in recent years and how definitions of value have also been questioned. Lesyk discusses FTSE Russell’s approach to building value portfolios and how best to remove off-target exposures.

Chapters

• (00:00:01) - Disclaimer
• (00:00:35) - Introduction
• (00:01:37) - Why are markets questioning the value premium?
• (00:02:25) - Recent market trends that have made value investing hard
• (00:04:13) - How does FTSE Russell calculate the value factor?
• (00:04:55) - Why does a single value factor portfolio have exposures to other factors?
• (00:06:20) - Why value factor portfolio exposures matter
• (00:07:05) - How can the Index designer remove undesired factor exposures from the value portfolio?
• (00:09:34) - What impact does neutralisation have on the value factor portfolio's risk and return?
• (00:11:05) - Trade-offs of more neutralised value indexes
• (00:12:00) - Find out more on the FTSE Russell website