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Optimal Timing and Tilting of Equity Factors

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Optimal Timing and Tilting of Equity Factors. / Dichtl, Hubert; Drobetz, Wolfgang; Lohre, Harald; Rother, Carsten; Vosskamp, Patrick.

In: Financial Analysts Journal, Vol. 75, No. 4, 02.10.2019, p. 84-102.

Research output: Contribution to journalJournal articlepeer-review

Harvard

Dichtl, H, Drobetz, W, Lohre, H, Rother, C & Vosskamp, P 2019, 'Optimal Timing and Tilting of Equity Factors', Financial Analysts Journal, vol. 75, no. 4, pp. 84-102. https://doi.org/10.1080/0015198X.2019.1645478

APA

Dichtl, H., Drobetz, W., Lohre, H., Rother, C., & Vosskamp, P. (2019). Optimal Timing and Tilting of Equity Factors. Financial Analysts Journal, 75(4), 84-102. https://doi.org/10.1080/0015198X.2019.1645478

Vancouver

Dichtl H, Drobetz W, Lohre H, Rother C, Vosskamp P. Optimal Timing and Tilting of Equity Factors. Financial Analysts Journal. 2019 Oct 2;75(4):84-102. https://doi.org/10.1080/0015198X.2019.1645478

Author

Dichtl, Hubert ; Drobetz, Wolfgang ; Lohre, Harald ; Rother, Carsten ; Vosskamp, Patrick. / Optimal Timing and Tilting of Equity Factors. In: Financial Analysts Journal. 2019 ; Vol. 75, No. 4. pp. 84-102.

Bibtex

@article{a8fde9319f94465e959dc1aced820e3b,
title = "Optimal Timing and Tilting of Equity Factors",
abstract = "Aiming to optimally harvest global equity factor premiums, we investigated the benefits of parametric portfolio policies for timing factors conditioned on time-series predictors and tilting factors based on cross-sectional factor characteristics. We discovered that equity factors are predictably related to fundamental and technical time-series indicators and to such characteristics as factor momentum and crowding. We found that such predictability is hard to benefit from after transaction costs. Advancing the timing and tilting policies to smooth factor allocation turnover slightly improved the evidence for factor timing but not for factor tilting, which renders our analysis a cautionary tale on dynamic factor allocation. Disclosure: Two of the authors are at Invesco, one is at Allianz Global Investors. The authors follow an evidence-based investment process, including multi-factor equity propositions. Therefore, Invesco and Allianz Global Investors have a commercial interest in the subject matter (optimal equity factor allocation). ",
author = "Hubert Dichtl and Wolfgang Drobetz and Harald Lohre and Carsten Rother and Patrick Vosskamp",
year = "2019",
month = oct,
day = "2",
doi = "10.1080/0015198X.2019.1645478",
language = "English",
volume = "75",
pages = "84--102",
journal = "Financial Analysts Journal",
issn = "0015-198X",
publisher = "CFA Institute",
number = "4",

}

RIS

TY - JOUR

T1 - Optimal Timing and Tilting of Equity Factors

AU - Dichtl, Hubert

AU - Drobetz, Wolfgang

AU - Lohre, Harald

AU - Rother, Carsten

AU - Vosskamp, Patrick

PY - 2019/10/2

Y1 - 2019/10/2

N2 - Aiming to optimally harvest global equity factor premiums, we investigated the benefits of parametric portfolio policies for timing factors conditioned on time-series predictors and tilting factors based on cross-sectional factor characteristics. We discovered that equity factors are predictably related to fundamental and technical time-series indicators and to such characteristics as factor momentum and crowding. We found that such predictability is hard to benefit from after transaction costs. Advancing the timing and tilting policies to smooth factor allocation turnover slightly improved the evidence for factor timing but not for factor tilting, which renders our analysis a cautionary tale on dynamic factor allocation. Disclosure: Two of the authors are at Invesco, one is at Allianz Global Investors. The authors follow an evidence-based investment process, including multi-factor equity propositions. Therefore, Invesco and Allianz Global Investors have a commercial interest in the subject matter (optimal equity factor allocation). 

AB - Aiming to optimally harvest global equity factor premiums, we investigated the benefits of parametric portfolio policies for timing factors conditioned on time-series predictors and tilting factors based on cross-sectional factor characteristics. We discovered that equity factors are predictably related to fundamental and technical time-series indicators and to such characteristics as factor momentum and crowding. We found that such predictability is hard to benefit from after transaction costs. Advancing the timing and tilting policies to smooth factor allocation turnover slightly improved the evidence for factor timing but not for factor tilting, which renders our analysis a cautionary tale on dynamic factor allocation. Disclosure: Two of the authors are at Invesco, one is at Allianz Global Investors. The authors follow an evidence-based investment process, including multi-factor equity propositions. Therefore, Invesco and Allianz Global Investors have a commercial interest in the subject matter (optimal equity factor allocation). 

U2 - 10.1080/0015198X.2019.1645478

DO - 10.1080/0015198X.2019.1645478

M3 - Journal article

AN - SCOPUS:85074894006

VL - 75

SP - 84

EP - 102

JO - Financial Analysts Journal

JF - Financial Analysts Journal

SN - 0015-198X

IS - 4

ER -