RT Journal Article
SR Electronic
T1 A Risk-Oriented Model for Factor Timing Decisions
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 46
OP 58
DO 10.3905/jpm.2015.41.3.046
VO 41
IS 3
A1 Keith L. Miller
A1 Hong Li
A1 Tiffany G. Zhou
A1 Daniel Giamouridis
YR 2015
UL https://pm-research.com/content/41/3/46.abstract
AB Alpha factors are built to perform well over time, on average. There are instances when they do not, and knowing these instances ex ante can be a significant source of added value for investors. The authors argue that factor failure is a function of its broad risk, and propose appropriate variables to measure it. They adopt a nonparametric model that predicts instances of likely factor failure, based on these variables, demonstrating that an implementable dynamic strategy based on our analysis generates a reward-to-risk ratio approximately four times that of a static approach, and about one and a half times that of an alternative dynamic approach based on momentum.TOPICS: Factor-based models, risk management