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Bridge over ocean
1 December 2016 Research Foundation

Factor Investing and Asset Allocation

A Business Cycle Perspective

  1. Vasanttilak Naik
  2. Mukundan Devarajan
  3. Andrew Nowobilski
  4. Sébastien Page, CFA
  5. Niels Pedersen

Factor Investing and Asset Allocation: A Business Cycle Perspective View the full book (PDF)

This monograph draws heavily on the vast body of knowledge that has been built by financial economists over the last 50 years. Its goal is to show how to solve real‐life portfolio allocation problems. We have found that using a broad range of models works best. Also, we prefer simple over complex models. We believe that simplicity and modularity lend substantial robustness to investment analysis. Importantly, the framework presented provides several of the “missing links” in asset allocation—for example, the links between asset classes and risk factors, between macroeconomic views and expected returns, and ultimately between quantitative and fundamental investing.