Cross Asset Multi Factor Investing
Good Evening All,
I’m looking for research papers that combine multi factor portfolios of individual asset classes and combines them into a single portfolio. (Equities, government bonds, high yield, commodities, currencies)
For context, I’m personally doing research on the topic and looking for similar research that may contradict or support my findings. I believe if this is done within a concentrated portfolio you can produce high risk adjusted return without any actual alpha.
what are you looking for? For factor tilting in equities there is a pile of work from Farma-French and Arnott onwards. For factor timing you have major works by Ang of Blackrock and de Longis of Oppenheimer. I am not aware of similar in other asset classes.
There’s been content created lately (last 1-3 years) about factors in credit, commodities and currencies. However, I’m looking a step further for instance you have created a factor portfolio of the individual asset classes but are now looking to combine them. Example: what if I had a portfolio of 50% equity value top quartile and 50% credit value top quartile.
I apologize, as you said there has been tilting research in most asset classes, and somebody recently put out a 200(!!!) year study for a couple of them which is amazing, since I have trouble getting 40 years of data in US Equities, and I have some pretty serious resources.
I meant that to my knowledge, there is no good research in multi-asset factor timing. Even if you have pretty conclusive proof that factors work, not all factors work all the time. For example, low vol will benefit you in downturns, but leave you behind in expanding markets. Correlation between, say, equity value and FI value would be interesting to study. Are the same factors in favor at the same times across all asset classes, or do they differ?
Do you have a link to the 200 year study?
It seems to be about 50% of the time the factors are correlated and 50% time not. I’m mostly just combining a bunch of 0.5 sharpe ratios with 0.5 correlation. I’ve been diving more into the fundamental drivers of factors and their ideal/not ideal environments. Like you said low vol does poorly in expanding markets so that should fundamental pair well with growth strategies, looking for causation not just correlation.
For FI value and equity value it seems mostly correlated in corporate bonds as it makes sense when a companies stock falls out of favor its bonds would for similar reasons. Key being mostly but not always.
Don't drink the Kool-Aid. Here it is, but I am still highly suspicious given the limitations I have personally seen in the most documented and liquid market in the world.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3325720
PM me, I use factor models in my day to day. Additionally, if you want the latest research look for popularity factor formula from Roger Ibbotson, he's a legend.
I found one piece that is getting at my original question. However, the detail is less than I desired.
https://investresolve.com/blog/resolves-buffett-bet-portfolio-risk-pari…
Wow, that Resolve study looks like lazy repetition of the the Robeco study. I would be very careful about using it for anything beyond toilet paper.
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