Investing Through a Macro Factor Lens

Risk & Reward, 2020, 4th issue, pp. 26-34

11 Pages Posted: 8 Feb 2021

See all articles by Harald Lohre

Harald Lohre

Invesco; Centre for Endowment Asset Management, Cambridge Judge Business School, University of Cambridge; Centre for Financial Econometrics, Asset Markets and Macroeconomic Policy, Lancaster University Management School

Robert S Hixon

affiliation not provided to SSRN

Jay H Raol

Invesco

Alexander Swade

Lancaster University - Department of Accounting and Finance; Invesco

Hua Tao

Invesco

Scott Wolle

affiliation not provided to SSRN

Date Written: November 16, 2020

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

Suggested Citation

Lohre, Harald and Hixon, Robert S and Raol, Jay H and Swade, Alexander and Tao, Hua and Wolle, Scott, Investing Through a Macro Factor Lens (November 16, 2020). Risk & Reward, 2020, 4th issue, pp. 26-34, Available at SSRN: https://ssrn.com/abstract=3738545

Centre for Endowment Asset Management, Cambridge Judge Business School, University of Cambridge

Cambridge
United Kingdom

HOME PAGE: http://www.jbs.cam.ac.uk/faculty-research/centres/ceam/

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/

Robert S Hixon

affiliation not provided to SSRN

Jay H Raol

Invesco ( email )

An der Welle 5
Frankfurt am Main, 60322
Germany

Alexander Swade

Lancaster University - Department of Accounting and Finance ( email )

Lancaster, Lancashire LA1 4YX
United Kingdom

Invesco ( email )

An der Welle 5
Frankfurt am Main, 60322
Germany

Hua Tao

Invesco ( email )

Atlanta, GA 30309
United States
4044394521 (Phone)
30309 (Fax)

Scott Wolle

affiliation not provided to SSRN

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