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

9 Citations (Scopus)

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, K. G., Slager, A. M. H., & Stork, P. A. (2016). Investing in systematic factor premiums. European Financial Management, 22(2), 193-234. https://doi.org/10.1111/eufm.12081