72 Pages Posted: 11 Jun 2013
Date Written: June 10, 2013
Factor investing asks: how well can a particular investor weather hard times relative to the average investor? Answering helps her reap long-run factor premiums by embracing risks that lose money during bad times, but make up for it the rest of the time with attractive rewards. When factor investing can be done cheaply, it raises the bar for active management.
Keywords: risk premium, bad times, factor allocation, alternative beta, smart beta, exotic beta, dynamic portfolio choice, fixed income weights, GDP-weights
JEL Classification: G11, G12, G15
Suggested Citation: Suggested Citation