Investing in systematic factor premiums

Kees G. Koedijk*, Alfred M. H. Slager, P.A. Stork

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

In this paper we investigate and evaluate factor investing in the US and Europe for equities and bonds. We show that factor-based portfolios generally produce comparable or better portfolios than market indices. We expand the analysis to other asset classes and factors, work with other optimisation methods and add a basic liability structure. The results do not depend on adding other asset classes or on the removal of a specific factor. Finally, we study the results for a worldwide investor who invests beyond the US and Europe. Over the longer term and with consistently applied factor diversification, factor investing appears to be advantageous.

Original languageEnglish
Pages (from-to)193-234
Number of pages42
JournalEuropean Financial Management
Volume22
Issue number2
DOIs
Publication statusPublished - Mar 2016

Keywords

  • portfolio management
  • factor investing
  • diversification
  • optimisation
  • EXPECTED STOCK RETURNS
  • CROSS-SECTION
  • FUND PERFORMANCE
  • ASSET ALLOCATION
  • COMMON-STOCKS
  • MARKET
  • RISK
  • BONDS
  • SHARPE
  • VOLATILITY

Cite this

Koedijk, Kees G. ; Slager, Alfred M. H. ; Stork, P.A. / Investing in systematic factor premiums. In: European Financial Management. 2016 ; Vol. 22, No. 2. pp. 193-234.
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Investing in systematic factor premiums. / Koedijk, Kees G.; Slager, Alfred M. H.; Stork, P.A.

In: European Financial Management, Vol. 22, No. 2, 03.2016, p. 193-234.

Research output: Contribution to journalArticleScientificpeer-review

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AU - Stork, P.A.

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N2 - In this paper we investigate and evaluate factor investing in the US and Europe for equities and bonds. We show that factor-based portfolios generally produce comparable or better portfolios than market indices. We expand the analysis to other asset classes and factors, work with other optimisation methods and add a basic liability structure. The results do not depend on adding other asset classes or on the removal of a specific factor. Finally, we study the results for a worldwide investor who invests beyond the US and Europe. Over the longer term and with consistently applied factor diversification, factor investing appears to be advantageous.

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KW - portfolio management

KW - factor investing

KW - diversification

KW - optimisation

KW - EXPECTED STOCK RETURNS

KW - CROSS-SECTION

KW - FUND PERFORMANCE

KW - ASSET ALLOCATION

KW - COMMON-STOCKS

KW - MARKET

KW - RISK

KW - BONDS

KW - SHARPE

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