By continuing on this site you have agreed to cookies being placed and accessed by this website. More information and adjusting cookie settings.

Robeco uses cookies to analyze your visit to this site, to share information via social media and to personalize the site and advertisements in line with your own preferences. By clicking on agree or by continuing on this site, you agree to the above. More information and adjusting cookie settings.

AGREE

Robeco uses cookies to analyze your visit to this site, to share information via social media and to personalize the site and advertisements in line with your own preferences. By clicking on agree or by continuing on this site, you agree to the above. More information and adjusting cookie settings.

AGREE

By continuing on this site you have agreed to cookies being placed and accessed by this website. More information and adjusting cookie settings.

from-the-field-175x95px.jpgFROM THE FIELD: Robeco researchers publish many whitepapers based on their own empirical studies. But they also closely follow quantitative research done by others. Head of Quantitative Equities Research David Blitz comments on notable external papers.

From the field: Factor investing for diversification purposes?

20-05-2015 | David Blitz, PhD A paper* argues that size, value, momentum and other factor portfolios might be considered as alternative building blocks for strategic asset allocation, because these offer an attractive risk premium and powerful diversification benefits.

Although we agree with the suggestion to consider factor strategies, we believe that the long/short portfolios proposed in the paper are probably too extreme, and also not particularly cost-effective for most investors. Instead, we would recommend that investors first consider replacing their traditional capitalization-weighted equity portfolios with a combination of long-only value, momentum and low-volatility portfolios.**

From a long-only perspective it also becomes clear that the main benefit of factor investing is an improved risk-adjusted return, rather than improved diversification.

* Ilmanen and Kizer (2012), “The Death of Diversification Has Been Greatly Exaggerated”, Journal of Portfolio Management 38(3), 15-27

Available at: http://www.iijournals.com/doi/abs/10.3905/jpm.2012.38.3.015

** See also Blitz (2012), “Strategic Allocation to Premiums in the Equity Market”, Journal of Index Investing 2(4), 42-49

Available at: http://www.iijournals.com/doi/abs/10.3905/jii.2012.2.4.042
David Blitz

David Blitz, PhD

Head Quantitative Equities Research

“Factor investing, aimed at systematically capturing the value, momentum, low-volatility and other premiums, holds the future.”

Share this page:

Author

David Blitz, PhD
Head Quantitative Equities Research


Join the conversation




Newsletter

Sign up for our email newsletter to receive updates and to stay informed about upcoming webinars.