256
Views
0
CrossRef citations to date
0
Altmetric
Research Article

Tactical factor allocation for multifactor portfolios

 

ABSTRACT

Factor investing comprises selecting the set of factors and the right amount of each factor for investment. While past research provides a better guidance on which factors to invest, deciding the right factor allocation has remained relatively elusive. Motivated by the superior performance provided by the equal-weighted strategy compared to the more sophisticated ones, we choose the former as the baseline or the strategic allocation scheme for factor investing and investigate if improvements can be established. Specifically, exploiting the momentum property exhibited by the factors, we propose a simple tactical factor allocation scheme for the equity-based multifactor portfolios. Empirical results reveal that the proposed tactical factor allocation outperforms the strategic one persistently over time and pervasively across different markets.

JEL CLASSIFICATION:

Acknowledgments

This work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korean government (MSIT) (2020R1F1A1A0106053811).

Disclosure statement

No potential conflict of interest was reported by the author.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Additional information

Funding

This work was supported by the National Research Foundation of Korea [2020R1F1A1A0106053811].

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.