Investing in a Multi-Asset Multi-Factor World

Risk & Reward, 2017, 3rd issue, pp. 4-11

10 Pages Posted: 12 Oct 2017

See all articles by Alexandar Cherkezov

Alexandar Cherkezov

Invesco

Harald Lohre

Invesco; Centre for Financial Econometrics, Asset Markets and Macroeconomic Policy, Lancaster University Management School

Sergey Protchenko

IQS

Jay H Raol

Invesco

Date Written: August 31, 2017

Abstract

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

Cherkezov, Alexandar and Lohre, Harald and Protchenko, Sergey and Raol, Jay H, Investing in a Multi-Asset Multi-Factor World (August 31, 2017). Risk & Reward, 2017, 3rd issue, pp. 4-11. Available at SSRN: https://ssrn.com/abstract=3048904

Alexandar Cherkezov

Invesco ( email )

An der Welle 5
Frankfurt am Main, 60322
Germany

Centre for Financial Econometrics, Asset Markets and Macroeconomic Policy, Lancaster University Management School

Bailrigg
Lancaster LA1 4YX
United Kingdom

HOME PAGE: http://www.lancaster.ac.uk/lums/research/research-centres/financial-econometrics/

Sergey Protchenko

IQS ( email )

Atlanta, GA 30309
United States

Jay H Raol

Invesco ( email )

An der Welle 5
Frankfurt am Main, 60322
Germany

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