Since the Great Recession of 2007 and the subsequent financial crisis of 2008, global financial markets have entered into unchartered territory characterized by extreme macroeconomic conditions, elevated volatility, heightened correlations across multiple markets, and uncertain fiscal and monetary policy responses. In this environment, some of the traditional quantitative equity strategies have struggled, in part due to the perverse behavior of their quantitative factors.
In a static quantitative model, the factor weightings are based on long-term risk-return statistics and show little change over a short time period. Therefore, while static models could perform well over the long term, they are vulnerable to changes in market conditions that may have an adverse impact on the model or factor performance in the short run.