Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Active factor completion strategies
AU - Dichtl, Hubert
AU - Drobetz, Wolfgang
AU - Lohre, Harald
AU - Rother, Carsten
PY - 2021/1/31
Y1 - 2021/1/31
N2 - Embracing the concept of factor investing, the authors design a flexible framework for building out different factor completion strategies for traditional multi-asset allocations. Their notion of factor completion comprises a maximally diversified reference portfolio anchored in a multi-asset multi-factor risk model that acknowledges market factors such as equity, duration, and commodity, as well as style factors such as carry, value, momentum, and quality. The specific nature of a given factor completion strategy varies with investor preferences and constraints. The authors tailor a select set of factor completion strategies that include factor-based tail hedging, constrained factor completion, and a fully diversified multi-asset multi-factor proposition. Their framework is able to organically exploit tactical asset allocation signals without sacrificing the notion of maximum diversification. To illustrate, the authors additionally embed the common trend style that permeates many asset classes, and they also include the notion of style factor momentum.
AB - Embracing the concept of factor investing, the authors design a flexible framework for building out different factor completion strategies for traditional multi-asset allocations. Their notion of factor completion comprises a maximally diversified reference portfolio anchored in a multi-asset multi-factor risk model that acknowledges market factors such as equity, duration, and commodity, as well as style factors such as carry, value, momentum, and quality. The specific nature of a given factor completion strategy varies with investor preferences and constraints. The authors tailor a select set of factor completion strategies that include factor-based tail hedging, constrained factor completion, and a fully diversified multi-asset multi-factor proposition. Their framework is able to organically exploit tactical asset allocation signals without sacrificing the notion of maximum diversification. To illustrate, the authors additionally embed the common trend style that permeates many asset classes, and they also include the notion of style factor momentum.
KW - Factor-based models
KW - Portfolio management/multi-asset allocation
KW - Style investing
U2 - 10.3905/JPM.2020.1.193
DO - 10.3905/JPM.2020.1.193
M3 - Journal article
AN - SCOPUS:85099943447
VL - 47
SP - 9
EP - 37
JO - Journal of Portfolio Management
JF - Journal of Portfolio Management
SN - 0095-4918
IS - 2
ER -