Measure
Factor crowding
Definition
Compression of a documented premium once enough capital pursues it.
How to read it
Published anomalies tend to weaken after publication as the trade becomes accessible and valuations of the long leg rise relative to the short.
What it does not tell you
Decay and ordinary bad luck look identical over any short window. Distinguishing a premium that has been arbitraged away from one having a poor decade requires far more data than a single fund's live record provides.
Applied in 3 articles
3Every figure computed with this measure on this site follows the conventions set out in the methodology. All measures →