‘Factor Zoo’ Paper Wins Top Prize in Bernstein Fabozzi/Jacobs Levy Awards

by Rob Kozlowski, Pensions & Investments, March 4, 2025: “Factor Zoo (.zip)” by Alexander Swade, Matthias Hanauer, Harald Lohre, and David Blitz won Best Article in the 26th Annual Bernstein Fabozzi/Jacobs Levy Awards. The winning authors sought to determine the minimum number of factors that could explain all factor alphas... Beginning with the CAPM market factor, the authors iteratively added factors that best captured any remaining factor alpha until they arrived at a model that eliminated all remaining factor alphas, reducing 153 U.S. equity factors to a set of 15 that can explain what they call the “factor zoo.” Bruce Jacobs, principal and co-founder of Jacobs Levy Equity Management, noted that “the authors’ analysis shows that many more factors are needed to explain returns than the three to six factors found in most academic factor models and highlights the importance of ongoing innovation in factor research.” All research articles that appeared in the Journal of Portfolio Management in 2024 were eligible for the award, which was voted on by subscribers.

Portfolio Insurance, Portfolio Theory, Market Simulation, and Risks of Portfolio Leverage

by Bruce I. Jacobs and Kenneth N. Levy, Annals of Operations Research (ANOR), “Investment: The Century of Markowitz,” March 2025: A reprint of Bruce Jacobs and Ken Levy’s article that initially appeared in the Journal of Portfolio Management’s special issue dedicated to Harry Markowitz in July 2024 appears in ANOR’s special issue dedicated to Harry Markowitz... The article recalls their decades-long working relationship with Nobel laureate Harry Markowitz, which began when Harry took an interest in Bruce’s efforts to debunk portfolio insurance. Harry adopted Bruce and Ken’s methodology for estimating security expected returns using cross-sectional analysis, and Bruce and Ken used Harry’s methods for portfolio construction. The three went on to collaborate on numerous projects, including exploring the value of using constraints in portfolio optimization, addressing the optimality and optimization of long-short portfolios, and developing JLMSim, an asynchronous, discrete-time, dynamic market simulator. Later, Bruce and Ken extended Harry’s portfolio theory to account for the unique risks of leverage through their mean-variance-leverage model. Bruce and Ken used the mean-variance-leverage model to address the optimal amount of leverage in 130-30-type portfolio strategies. The article delves into their collaborations and highlights how they drew inspiration from each other.

QES Academic Review

by Goldman Sachs, January 2025: An overview of Bruce Jacobs and Ken Levy’s article, “Portfolio Insurance, Portfolio Theory, Market Simulation, and Risks of Portfolio Leverage,” was featured in the January 2025 issue of QES Academic Review, a publication of Goldman Sachs’ Quantitative Execution Services... The article originally appeared in the July 2024 Journal of Portfolio Management (JPM) Special Issue Dedicated to Harry Markowitz, which was co-edited by Jacobs, Levy, and JPM Editor Frank Fabozzi, and was reprinted in the Annals of Operations Research special issue dedicated to Harry Markowitz. The QES Academic Review identifies new research directly applicable to Goldman Sachs’ clients’ investment and trading processes as well as theoretical contributions that promise to shape the current academic debate.