Multifactor Models

Multifactor models are financial tools used to understand and predict investment returns by considering multiple influences, called factors. These factors can include economic indicators, industry trends, or company-specific traits like size or value. By analyzing how these various elements impact performance, the model helps investors assess risk and make informed decisions. Instead of relying on a single cause, multifactor models capture the complexity of markets, providing a more accurate picture of what influences asset prices and helping manage investment strategies effectively.