Factor Crowding
Definition
What is Factor Crowding?
A condition in which many investors hold similar factor positions, increasing reversal or liquidity riskThe risk that an asset cannot be sold quickly at a reasonable price or a redemption cannot be met promptly..
Example in practice
How This Looks in Practice
A crowded momentumThe tendency of assets with strong recent performance to continue outperforming for a period. trade unwinds sharply.
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Related Terms
Factor Investing
An approach targeting broad, persistent return drivers such as value, size, momentum, quality, or low volatility.
Factor InvestingValue Factor
The tendency for relatively cheap securities to perform differently from expensive securities over time.
Factor InvestingSize Factor
The return pattern associated with smaller companies relative to larger companies.
Regulation & ComplianceFiduciary Duty
A legal or ethical duty to act loyally and carefully in another person's best interest.