Alternative Risk Premia Timing: A Point-in-Time Macro, Sentiment, Valuation Analysis

Forthcoming in Journal of Systematic Investing

35 Pages Posted: 28 Sep 2018 Last revised: 20 Jan 2021

See all articles by Olivier Blin

Olivier Blin

Unigestion SA

Florian Ielpo

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES)

Joan Lee

Unigestion

Jerome Teiletche

Unigestion

Date Written: December 31, 2020

Abstract

We investigate the question of dynamic allocation across a diversified range of alternative risk premia. By using a set of point-in-time indicators across macro, sentiment and valuation dimensions, we find that a majority of indicators deliver a positive information ratio for a majority of alternative risk premia over the period 2005-2020. In our empirical simulations, the macro dimension seems to have worked well, notably during recession periods. Sentiment (based on market stress and momentum) struggled during recovery periods, but added value elsewhere. Valuation has worked well from 2005 to 2013 and lost part of its appeal since then. The combination of indicators allows to deliver a higher information ratio thanks to the low correlation among them. Our research also finds that point-in-time macroeconomic variables (“nowcasters”) can add value over traditional indicators, while this improvement is not significant in the case of the market stress indicator.

Forthcoming in Journal of Systematic Investing.

Keywords: Alternative Risk Premia, Carry, Trend-Following, Momentum, Equity Factors, Risk-Based Investing, Macro Regimes, Asset Allocation

JEL Classification: G11, G17

Suggested Citation

Blin, Olivier and Ielpo, Florian and Lee, Joan and Teiletche, Jerome, Alternative Risk Premia Timing: A Point-in-Time Macro, Sentiment, Valuation Analysis (December 31, 2020). Forthcoming in Journal of Systematic Investing , Available at SSRN: https://ssrn.com/abstract=3247010 or http://dx.doi.org/10.2139/ssrn.3247010

Olivier Blin

Unigestion SA ( email )

8c, avenue de Champel CP 387
CP 387
Genève 12, CH 1211
Switzerland

Florian Ielpo

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES) ( email )

106-112 Boulevard de l'hopital
106-112 Boulevard de l'Hôpital
Paris Cedex 13, 75647
France

Joan Lee

Unigestion ( email )

8c, avenue de Champel CP 387
CP 387
Genève 12, CH 1211
Switzerland

Jerome Teiletche (Contact Author)

Unigestion ( email )

8c, avenue de Champel CP 387
CP 387
Genève 12, CH 1211
Switzerland

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