Over the past years factor investing has gained ground as an academically motivated investment style that allocates explicitly to factor premiums. Well-knows factor premiums are the value, momentum, carry and low-risk premium. Meanwhile, factor investing has become well established within equities and is becoming increasingly popular in other asset classes (e.g. corporate bonds). In a multi-asset context, where portfolios are constructed that consist of multiple asset classes (e.g. equities, bonds, currencies), factor investing is still in its infancy.
In this research project we like to investigate factor investing in multi-asset context. Some inspiration can be found in the academic literature. E.g. Moskowitz et al. (2011) describe time-series momentum, Koijen et al. (2015) investigate the Carry factor, Asness et al. (2013) investigate value and momentum in several asset classes, and Blitz and Van Vliet (2008) look at applying valuation and momentum across asset classes.
We are interested to know if (and which) factors can be used in a systematic way as an tactical asset allocation tool to predict 1) the direction of individual markets; and 2) cross-sectional dispersion between different markets. In the end we want to know how we can best construct an absolute return strategy that can take long and short positions based on proven factors. In this research will use country and regional instruments rather than company specific securities.
Assness, Moskowitz and Pedersen (Journal of Finanace, 2013), Value and Momentum Everywhere. http://pages.stern.nyu.edu/~lpederse/papers/ValMomEverywhere.pdf
Baltas and Kosowski (2014), Demystifying Time-Series Momentum Strategies: Volatility Estimators, Trading Rules and Pairwise Correlations. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2140091&rec=1&srcabs=2599635&alg=1&pos=1
Blitz and Van Vliet (Journal of Portfolio Management, 2008), Global Tactical Asset Allocation: Applying Value and Momentum Across Asset Classes. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1079975
Daniel ad Moskowitz (2014), Momentum Crashes. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2632705
Du Plessis and Hallerbach (Journal of Alternative Investing, forthcoming), Volatility Weighting Applied to Momentum Strategies. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2599635
Koijen, Moskowitz, Pedersen and Vrugt (2015), Carry.http://docs.lhpedersen.com/TimeSeriesMomentum.pdf
Moskowitz, Ooi and Pedersen (Journal of Financial Economics, 2011), Time Series Momentum. http://docs.lhpedersen.com/TimeSeriesMomentum.pdf