Navigating Federal Reserve Policy with IFED

16 Pages Posted: 24 Apr 2024

Date Written: April 12, 2024

Abstract

Invest With the Fed, or “IFED”, is a quantitative equity strategy that selects portfolios positioned to prosper in the market environment signaled by Federal Reserve actions. IFED was designed by the principals of Economic Index Associates (“EIA”) all three of whom are experienced academics. The strategy selects and weights individual equities based on twelve factors in a bottom-up fashion. The strategy adjusts the weights of the twelve factors based on the market environment, as defined by Federal Reserve policy signals, in a top-down fashion. This integrated approach has generated material alpha over the last two decades in backtests and more importantly, out of sample over the last 3+ years. The strategy generalizes well across different equity sectors and mandates, as evidenced by the success of both the Large Cap and Low Volatility versions of the strategy. In this article, we will explore the potential benefits of the strategy on a standalone and portfolio basis.

Keywords: Factor investing, Multi-factor investing, Factor timing, Equity investing, Federal Reserve Policy, Optimization, Market Regimes

JEL Classification: C00,G10,G11, C35

Suggested Citation

Rankin, Rufus, Navigating Federal Reserve Policy with IFED (April 12, 2024). Available at SSRN: https://ssrn.com/abstract=4792586 or http://dx.doi.org/10.2139/ssrn.4792586

Rufus Rankin (Contact Author)

Nasdaq ( email )

United States

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