latames

Diversification over factors

Exposing the portfolio to a variety of factors improves diversification. The aim of diversifying according to underlying factors is to make the portfolio more robust.

Diversification using the factor approach differs from the traditional method of distribution over asset classes such as equities, bonds and private equity, commodities, hedge funds and regions. The latter approach doesn’t provide insight into the underlying factors that determine the return-risk ratio of a portfolio.

Factor investing means that we divide up a portfolio into factors with significant expected risk and/or return differentials. Accordingly, the assets in a factor-based portfolio are distributed over premiums such as low volatility, size, value and momentum.

Quantitative investing: invisible layers surface to deliver attractive returns
Quantitative investing: invisible layers surface to deliver attractive returns
Read more
El momentum es una profecía autocumplida, y ahí radica su fuerza
El momentum es una profecía autocumplida, y ahí radica su fuerza
La prima momentum surge de ciertos errores en el razonamiento humano.
06-09-2021 | Visión
‘Moore’s Law is disrupting the world of quant investing’
‘Moore’s Law is disrupting the world of quant investing’
Increasing computing power is altering the investment landscape.
16-08-2021 | Entrevista
‘Equity price movements are mainly driven by behavior, not risk’
‘Equity price movements are mainly driven by behavior, not risk’
The FIFA 19 Ultimate Team (FUT) online transfer market and machine learning shed some light on behavioral finance.
01-07-2021 | Entrevista