Abstract
Many investors expect a well-crafted asset allocation strategy to provide exceptional risk management through diversification. However, research has shown that asset returns can be highly correlated during down markets and periods of extreme market turmoil, reducing the effectiveness of diversification. In <i><b>Macro Factor Investing with Style</b></i>, from the 2022 Quantitative Strategies special issue of <i><b>The Journal of Portfolio Management</b></i>, <b>Alexander Swade</b> (<b>Invesco</b>), <b>Harald Lohre</b> (<b>Invesco</b>), <b>Mark Shackleton</b> (<b>Lancaster University</b>), <b>Sandra Nolte</b> (<b>Lancaster University</b>), <b>Scott Hixon</b> (<b>Invesco</b>), and <b>Jay Raol</b> (<b>Invesco</b>), propose that investors diversify using macroeconomic factors instead of asset allocation. Macro factors have proven to be better at clarifying the variation of investment returns across asset classes and style factors in specific economic situations. The authors demonstrate that focusing on three relevant macro factors—growth, inflation, and defensive—enhances portfolio risk management by investing in macro factors that show high exposure to different market states.
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
