Investing in a Multi-Asset Multi-Factor World
Risk & Reward, 2017, 3rd issue, pp. 4-11
10 Pages Posted: 12 Oct 2017
Date Written: August 31, 2017
In this article, we advance the use of factor investing across multiple asset classes. It turns out that style factors well established in the equity domain – such as value, momentum or quality – do extend to other asset classes as well. Even more so, multi-asset multi-factors significantly expand the investment opportunity set relative to a traditional multi-asset universe. Seeking to exploit this potential, we put forward an innovative diversified risk parity strategy that is designed to strive for maximum diversification in the multi-asset multi-factor world. To illustrate the strategy’s merits, we investigate its stylized facts vis-à-vis more standard allocation approaches.
Keywords: Style factors, factor investing, maximum diversification, risk parity
JEL Classification: G11, D81
Suggested Citation: Suggested Citation