Investing in Systematic Factor Premiums

Philip Stork, Kees Koedijk and Alfred Slager

No 10824, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this paper we investigate and evaluate factor investing in the United States 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 optimization methods and add a basic liability structure. The results remain robust when we add real estate and commodities to equities and bonds. Also, the results are not dependent to 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.

Keywords: Factor investing; European data; Optimization; Timing (search for similar items in EconPapers)
JEL-codes: G11 G12 G15 G23 (search for similar items in EconPapers)
Date: 2015-09
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Journal Article: Investing in Systematic Factor Premiums (2016)
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