Investing in Systematic Factor Premiums

54 Pages Posted: 16 Sep 2015

See all articles by Kees C. G. Koedijk

Kees C. G. Koedijk

Tilburg University - Department of Finance

Alfred Slager

Tilburg University - TIAS School for Business and Society

Philip A. Stork

Vrije Universiteit Amsterdam, School of Business and Economics; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Multiple version iconThere are 3 versions of this paper

Date Written: September 2015

Abstract

In this paper we investigate and evaluate factor investing in the United States and Europe for equities and bonds. We show that factor-based portfolios generally produce comparable or better portfolios than market indices. We expand the analysis to other asset classes and factors, work with other optimization methods and add a basic liability structure. The results remain robust when we add real estate and commodities to equities and bonds. Also, the results are not dependent to the removal of a specific factor. Finally, we study the results for a worldwide investor who invests beyond the US and Europe. Over the longer term and with consistently applied factor diversification, factor investing appears to be advantageous.

Keywords: European data, factor investing, optimization, timing

JEL Classification: G11, G12, G15, G23

Suggested Citation

Koedijk, Kees G. and Slager, Alfred and Stork, Philip A., Investing in Systematic Factor Premiums (September 2015). CEPR Discussion Paper No. DP10824. Available at SSRN: https://ssrn.com/abstract=2661553

Kees G. Koedijk (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 4663048 (Phone)
+31 13 4662052 (Fax)

Alfred Slager

Tilburg University - TIAS School for Business and Society ( email )

Warandelaan 2
TIAS Building
Tilburg, Noord Brabant 5037 AB
Netherlands

Philip A. Stork

Vrije Universiteit Amsterdam, School of Business and Economics ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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