Factor investing on the market-level using company-level data

Factors investing aims to beat the market using systematic investment strategies grounded in extensive academic research. Examples of proven factors are value – buying cheap assets, momentum – buying assets of which the price is going up, and quality – buying assets with sound fundamentals.

Robeco is a global leader in the factor investing strategies for selecting individual stocks and bonds, and a pioneer in factor investing for allocation strategies. Allocation strategies deal with the big, top-down, market-level decisions in an investment portfolio, such as: “Should we invest in government bonds, corporate bonds or equities?”, and: “Within the equity market which country should we invest in?”.

Asness et al. (2013) show that generic value and momentum can be used as country allocation strategies. But the researchers at Robeco are always looking for new and enhanced factors. In this research project we aim to use our rich individual company-level data set to enhance our market-level allocation strategies. This data set contains many variables that have not been extensively researched in a country-allocation context before. Examples are measures of company quality, like low accruals (Sloan, 1996), low investments (Cooper, Gulen, and Schill, 2008) and high gross profitability (Novy-Marx, 2013). These factors have predictive power in the cross-section of individual stock returns, so why wouldn’t they be useful in predicting country returns as well?

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Previous projects


Asness, Moskowitz, Pedersen, 2013, “Value and Momentum Everywhere”, The Journal of Finance

Cooper, Gulen, Schill, 2008, “Asset growth and the cross‐section of stock returns”, The Journal of Finance

Novy-Marx, 2013, “The other side of value: The gross profitability premium”, Journal of Financial Economics

Sloan, 1996, “Do Stock Prices Fully Reflect Information in Accruals and Cash Flows about Future Earnings?”, The Accounting Review