Active factor completion strategies

Dichtl, Hubert and Drobetz, Wolfgang and Lohre, Harald and Rother, Carsten (2021) Active factor completion strategies. Journal of Portfolio Management, 47 (2). pp. 9-37. ISSN 0095-4918

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Abstract

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.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Portfolio Management
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/2000/2002
Subjects:
ID Code:
160327
Deposited By:
Deposited On:
12 Oct 2021 11:30
Refereed?:
Yes
Published?:
Published
Last Modified:
12 Oct 2021 11:30