Investing Through a Macro Factor Lens
Risk & Reward, 2020, 4th issue, pp. 26-34
11 Pages Posted: 8 Feb 2021
Date Written: November 16, 2020
A macro factor perspective can help guide portfolio allocation by focusing on salient macroeconomic factors like growth or inflation. We study the link between such macro factors and common multi-asset multi-factor investment building blocks. Specifically, we investigate their macro factor sensitivities and propose a simple, yet effective, route to designing diversified macro factor-mimicking portfolios that prove beneficial in diversifying a given portfolio allocation with respect to its macro factor exposures.
Keywords: Macro Factors, Factor Investing, Diversification, Factor Completion
JEL Classification: E44, G11, G12
Suggested Citation: Suggested Citation