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Discussion Paper Details

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Title: Investing in Systematic Factor Premiums

Author(s): Kees Koedijk, Alfred Slager and Philip Stork

Publication Date: September 2015

Keyword(s): European data, factor investing, optimization and timing

Programme Area(s): Financial Economics

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.

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Bibliographic Reference

Koedijk, K, Slager, A and Stork, P. 2015. 'Investing in Systematic Factor Premiums'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10824