A comprehensive appraisal of style-integration methods

Abstract

The paper provides a comprehensive appraisal of style-integration methods in equity index, fixed income, currency, and commodity futures markets. We confront the naïve equal-weight integration (EWI) method with a host of 'sophisticated' style-integrations that derive the style exposures using past data according to utility maximization, style rotation, volatility timing, cross-sectional pricing, style momentum or principal components criteria. The analysis, conducted separately per futures market and cross-markets, reveals that the EWI portfolio is unrivalled in terms of risk-adjusted performance while it sustains a relatively low turnover. The findings are robust to analyses that entertain variants of the sophisticated integrations, longer estimation windows, several asset scoring schemes, data snooping tests, sub-periods evaluation and equities in place of futures.

The untold story of commodity futures in China

“…Thus, we restress the importance of institutional participation both domestically and internationally in addressing the potential perils of excessive speculation. value i t , is the log of the average daily price of commodity i from 3.5 to 4.5 years ago divided by the price at time t, and D is the number of days between 3.5 and 4.5 years ago Asness et al (2013);Fernandez-Perez et al (2019)…”

The risk premia of energy futures

“…CTAs are regulated by the U.S. federal government through the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). such, it extends to the energy futures markets context a more general literature across asset classes that endorses style-integration (e.g., Brandt et al, 2009;Kroencke et al, 2014;Barroso and Santa-Clara, 2015;Fischer and Gallmeyer, 2016;Fernandez-Perez et al, 2019).…”

“…In its simplest form and following Barroso and Santa-Clara (2015), Fitzgibbons et al (2016) and Fernandez-Perez et al (2019), . Namely, the integrated portfolio simply gives equal weights to the K style portfolios.…”

The strategic allocation to style-integrated portfolios of commodity futures

“…3 This literature has established that such style-integrated portfolios offer better risk-adjusted performance and lower crash risk than long-only or single-style portfolios. These benefits accrue across asset classes such as equities (Brandt et al, 2009;Fischer and Gallmeyer, 2016), currencies (Kroencke et al, 2014;Barroso and Santa-Clara, 2015) and on a cross-market analysis (Fernandez-Perez et al, 2019).…”