Abstract
Institutional investors have new tools to inform their construction of factor-based portfolios. Rather than focusing on the choice of factor, says author Michael Hunstad, investors should base their allocations on their investment horizon. By clearly mapping factors—size, value, momentum, low volatility and dividend yield—to their cyclical return patterns, investors can formulate their optimal factor allocation model. Instead of asking ‘Which factor?’ investors should ask ‘When and for how long should I invest?’” explains the author, who is Senior Vice President and Director of Quantitative Research at Northern Trust Asset Management. “When I get the question ‘What’s the best factor?’ I say there isn’t a ‘best’ per se. Every factor can have a place in a portfolio based on your holding period,” he says.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.