Published 2026-10-14
Factor
A factor is a measurable characteristic used to explain or predict returns — value, momentum, size, quality. Factors are the raw material of quantitative screening, and the area where data quality matters most.
What it is
A factor is a measurable characteristic used to explain or predict returns — value, momentum, size, quality, volatility, and others.
Factors are the raw material of quantitative screening: you express what you want as factors, then filter.
Why data quality dominates here
A factor is only as good as the data behind it. Common failure modes are all data problems:
| Problem | Effect |
|---|---|
| Restated fundamentals | The factor uses later corrections (look-ahead) |
| Missing delisted names | The factor is measured on survivors only (survivorship) |
| Inconsistent units | The factor compares things that are not comparable |
| Stale values | The factor reflects a date that was not stated |
How to check
Ask where each factor’s inputs come from, and at what point in time they were known. A factor without a stated source and timestamp is not a factor — it is a column of numbers.