Front Cover

Factor Investing: From Traditional to Alternative Risk Premia

Copyright

Contents

Foreword

Acknowledgements

Introduction

Bibliography

1. The Price of Factors and the Implications for Active Investing

1.1. Introduction

1.2. Smart beta: the Uber of asset management

1.3. Allocating to smart beta: an unambiguously active decision

1.4. Adoption of smart beta

1.5. Organizational issues for smart beta

1.6. Toward idiosyncratic returns

1.7. The role of benchmarks: has the benchmark triumphed, or is it dead?

1.8. Idiosyncratic returns: the emergence of a multivariate benchmark whether one likes it or not

1.9. Opportunities for asset managers and asset owners

1.10. Bibliography

2. Factor Investing: The Rocky Roadfrom Long-Only to Long-Short

2.1. Introduction

2.2. Short-selling and factor investing

2.3. Data and methods

2.4. Empirical results

2.5. Conclusion

2.6. Bibliography

3. Peering under the Hood of Rules-Based Portfolio Construction: The Impact of Security Selection and Weighting Decisions

3.1. Introduction

3.2. A framework for rules-based portfolio construction

3.3. Key decisions for rules-based portfolio construction: security selection and weighting

3.4. The maximum effective multiplier

3.5. Analyzing the MEM for several popular cases

3.6. Conclusion

3.7. Appendices

3.8. Bibliography

4. Diversify and Purify Factor Premiums in Equity Markets

4.1. Introduction

4.2. Factors

4.3. Results

4.4. Conclusions

4.5. Bibliography

5. The Predictability of Risk-Factor Returns

5.1. Introduction

5.2. Literature review

5.3. Methodology

5.4. Data

5.5. Results

5.6. Conclusion

5.7. Bibliography

6. Style Factor Timing

6.1. Introduction

6.2. Why does it matter?

6.3. Modeling techniques

6.4. Global macro database

6.5. Conclusion

6.6. Bibliography

7. Go with the Flow or Hide from the Tide? Trading Flow as a Signal in Style Investing

7.1. Introduction

7.2. Data

7.3. Style portfolios and style flows

7.4. Style flows, returns and risk: a statistical perspective

7.5. Economic significance

7.6. The effect of using non-overlapping data

7.7. Conclusions

7.8. Bibliography

8. Investment and Profitability: A Quality Factor that Actually Works

8.1. Introduction

8.2. Literature review

8.3. Robustness across geographies and definitions

8.4. A more detailed examination of profitability and investment

8.5. Conclusion

8.6. Appendix: Profitability and investment from multifactor perspective – a practitioner’s perspective

8.7. Bibliography

9. Common Equity Factors in Corporate Bond Markets

9.1. Introduction

9.2. Traditional indices in fixed-income markets

9.3. Factor investing in credit markets

9.4. Data and methodology

9.5. Empirical results

9.6. Conclusion

9.7. Bibliography

10. Alternative Risk Premia: What Do We Know?

10.1. Introduction

10.2. The rationale of ARP

10.3. Defining ARP

10.4. Portfolio allocation with ARP

10.5. Conclusion

10.6. Appendix: Mathematical results

10.7. Bibliography

11. Strategic Portfolio Allocation With Factors

11.1. Introduction

11.2. Factors

11.3. What do I own?

11.4. What do I want to own?

11.5. How do I get there?

11.6. Conclusion

11.7. Appendix

11.8. Bibliography

12. A Macro Risk-Based Approach to Alternative Risk Premia Allocation

12.1. Introduction

12.2. Literature review

12.3. Alternative risk premia construction and empirical characteristics

12.4. Alternative risk premia and economic regimes: a first overview

12.5. A macro risk-based asset allocation framework

12.6. Conclusion

12.7. Appendix: Nowcasting economic regimes

12.8. Bibliography

13. Optimizing Cross-Asset Carry

13.1. Introduction

13.2. The concept of FX carry

13.3. Extending the idea across asset classes

13.4. Data and carry diagnostics

13.5. Constructing carry portfolios

13.6. Is it crash risk?

13.7. Concluding remarks

13.8. Appendix: Estimating the carry metric for each asset class

13.9. Bibliography

14. Diversification and the Volatility Risk Premium

14.1. Introduction

14.2. Definition of VRP

14.3. Why does it exist?

14.4. Evidence from CBOE Indices on VRP

14.5. Trading the VRP

14.6. Data construction

14.7. VRPs in a portfolio context

14.8. VRPs and PFPs

14.9. Conclusion

14.10. Bibliography

15. Factor Investing and ESG Integration

15.1. Introduction

15.2. Data and methodology

15.3. Treating ESG as a factor

15.4. Integrating ESG into passive strategies

15.5. Integrating ESG into factor strategies

15.6 Summary og results and implecations for portfolio construction

15.7. Conclusion

15.8. Appendices

15.9. Bibliography

16. The Alpha and Beta of Equity Hedge UCITS Funds: Implications for Momentum Investing

16.1. Introduction

16.2. Literature review

16.3. Data and methodology

16.4. The cross-section of factor exposures and residual performance

16.5. Persistence of equity hedge UCITS managers

16.6. Concluding remarks

16.7. Bibliography

List of Authors

Endorsements

Index

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