Risk-only investment strategies have been growing in popularity as traditional investment strategies have fallen short of return targets over the last decade. However, risk-based investors should be aware of four things. First, theoretical considerations and empirical studies show that...

In this article, the authors measure the impact of estimation error on latent factor model forecasts of portfolio risk and factor exposures. In markets simulated with a Gaussian return generating process, the authors measure errors in forecasts for equally weighted and long-only minimum variance...