Are Factor Investing Strategies Successful Out-of-Sample: Evidence From the Nifty Indices

Abstract

Do factor investment strategies that have generated superior returns in the past continue to do so out-of-sample? To test this hypothesis, I check the performance of nine factor-based indices of the National Stock Exchange (NSE) of India. My results show that the performance of most indices falls considerably in the out-of-sample period, i.e. the period after the launch of an index. The results hold for absolute as well as excess and risk-adjusted returns. In additional tests, I find that none of the factor strategies generates significant alpha after controlling for standard factors such as size, value, and momentum.