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Quants Learn a Tough Lesson on Their Limits From Kraft Plunge

  • Dividend, low volatility and value ETFs all own the stock
  • So-called smart beta strategies tend to rely on historic data

Kraft Heinz Co.’s precipitous plunge is making quants uncomfortable.

The owner of the Oscar Mayer trademark, which fell as much as 27 percent Friday, is found in many U.S. exchange-traded funds that employ factor-based strategies focused on capturing dividends, avoiding volatility or identifying underpriced stocks. The decline highlights the pitfalls in slicing and dicing the equity market by looking at a stock’s characteristics.