A Framework for Risk Premia Investing

Abstract

We propose a new framework for alternative risk premia investing to facilitate the construction of balanced portfolios of commonly known strategies across asset classes. The categories of the framework, fundamental, behavioral, and structural premia, describe the nature and the robustness of the premia within the category. Each of the categories is further divided into a defensive and offensive compartment depending on the risk characteristics of the premia.

Keywords: Factor Investing, Alternative Beta, Smart Beta, Risk Premia, Style Investing, Quantitative Investment Strategies, Portfolio Construction, Asset Allocation, Anomaly, Quality, Value, Carry, Volatility, Momentum, Low Beta

JEL Classification: G11, G12, G15