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|Title||Double Sort versus Factor Investment|
|Institution||University of Zurich|
|Faculty||Faculty of Business, Economics and Informatics|
|Number of Pages||56|
|Abstract Text||One of the oldest disciplines in finance is the explanation of asset prices. Since the early years of the 20th century, researchers investigated the question what determines asset returns, how they vary over time and between asset classes. Especially the phenomenon of so called risk premia was subject to high interest. Risk premia try to explain positive excess returns with economical fundamentals, which is very difficult to do in a generalized way. The result of this long lasting work were models, where the asset returns are determined by factors that describe a security. These factors were first linked to certain risks that were thought to be taken by investors, but it turned out that irrational behaviour of market participants might as well be a reason why these factors exist. Combining factors together in a model led to the most famous one, introduced by Fama and French in 1993. Until now, there are a large number of factors that are claimed being relevant, however just a few of them are generally accepted among researchers. The so called factor investing became very popular in the industry over the last decades. However, it is not simple to implement it in praxis. Since theory focused more on the existence of factors themselves, one has to find an efficient portfolio construction to harvest the factor risk premia. This thesis builds up on the literature about the factor existence and aims to investigate a more practical way to harvest the most popular factor risk premia in praxis.|