Investing Through a Macro Factor Lens

Abstract

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