A Factor Approach to Asset Allocation

Clarke, Roger; Silva, Harindra de; Murdock, Robert

doi:10.3905/jpm.2005.599487

Cited by 32 publications

(19 citation statements)

References 4 publications

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“…These factors are also investigated by Amenc et al (2009), Ang et al (2009), Bender et al (2010, Blitz and Van Vliet (2008), Clarke et al (2005) and Verbeek (2007, 2009). Indeed, these articles also mention Market, Value, Size and Momentum as factors.…”

Section: Most Common Factorsmentioning

confidence: 98%

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Investing in Systematic Factor Premiums

Koedijk

Slager

Stork

2016

Euro Fin Management

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In this paper we investigate and evaluate factor investing in the US 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 optimisation methods and add a basic liability structure. The results do not depend on adding other asset classes or on 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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Section: Most Common Factorsmentioning

confidence: 98%

“…(), Blitz and Van Vliet (), Clarke et al . () and Huij and Verbeek (, ). Indeed, these articles also mention Market, Value, Size and Momentum as factors.…”

Section: Factor Premiumsmentioning

confidence: 99%

Investing in Systematic Factor Premiums

Koedijk

Slager

Stork

2016

Euro Fin Management

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“…Table 5 shows that the bearish regime of high-yield spread exhibits a low yet positive average return, which covers the periods of August 1998 to November 1998, September 2000 to Again, these periods can be related to a few crises, which are similar to our findings in the equity premium. This can be understood since a lower high-yield spread indicates a higher default premium in the market (Clarke, de Silva, and Murdock, 2005).…”

Section: Regimes In Factor Premiummentioning

confidence: 99%

“…As to the factor regimes, a strand of literatures documented the superiority of factor-based asset allocation relative to asset-classes-based asset allocation (Clarke, de Silva, and Murdock, 2005;Bender, Briand, Nielsen, and Stefek, 2010;Bender et al, 2010;Page and Taborsky, 2011). The rationale is that the factor-based allocation concentrates on factors that carry risk premium as multiple distinct sources of returns.…”

Section: Factor Regimesmentioning

confidence: 99%

“…A higher high-yield spread indicates a lower default premium, and vice versa. These are common measures for the premiums in the factorbased asset allocation (see for example, Clarke, de Silva, and Murdock (2005), Bender, Briand, Nielsen, and Stefek (2010), Bender et al (2010), Page and Taborsky (2011)). Figure 2 shows the graphs for both macroeconomic and factor regimes.…”

Section: Regimes In Factor Premiummentioning

confidence: 99%

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The role of Islamic asset classes in the diversified portfolios: Mean variance spanning test

Dewandaru

Masih

Bacha

et al. 2017

Emerging Markets Review

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This study investigates both conventional and Islamic investors' problems as to whether the inclusion of Islamic and conventional asset classes may expand the frontier of their respective portfolios. Our sample covers the global U.S. portfolios and Malaysian portfolios with multiple asset classes, as well as the portfolios with a specific asset class in several regions. This study uses the recent mean-variance spanning test in multiple regimes, which not only accounts for tail risk but also identifies the source of value added (tangency portfolio or global minimum variance).For intra-asset allocation, our findings show that both Islamic and conventional fund managers of a specific asset class can benefit from conventional and Islamic asset classes, respectively, in several regimes. For inter-asset allocation, conventional institutional investors cannot obtain any value added from Islamic asset classes. On the contrary, the U.S. Islamic institutional investors can expand their tangency portfolio by investing in U.S. TIPSs and REITs, and reduce their global minimum variance by allocating on U.S. high-yield bonds. Moreover, the Malaysian Islamic institutional investors can obtain risk reduction by investing in conventional bonds only in the high term premium regime. For the remaining asset classes, the opportunity sets are sufficient for Islamic investors to invest complying with Shariah rules. We provide some policy implications for the global Islamic financial industry.

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Harvesting Islamic risk premium with long–short strategies: A time scale decomposition using the wavelet theory

Ahroum¹,

Achchab²

2019

Int. J Fin Econ

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The impact of the Islamic screening on the performance of stock and sukuk investments is subject of a serious debate. The aim of this paper is to contribute to the ongoing studies on Islamic markets by giving new insights about characteristics of the Islamic risk premium. To attempt this objective, we adopt a risk premia methodology using long–short strategies and a time scale decomposition to find out the scale and the intensity degree of this effect over time. Furthermore, we consider the Islamic risk premium as a market factor. Wavelet analysis results in Malaysia highlight the presence of the Islamic effect at low frequency bands and a higher intensity among the corporate debt market. However, this approach's effectiveness is conditioned to the existence of Islamic and conventional benchmarks.

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A Factor Approach to Asset Allocation

Cited by 32 publications

References 4 publications

Investing in Systematic Factor Premiums

Investing in Systematic Factor Premiums

The role of Islamic asset classes in the diversified portfolios: Mean variance spanning test

Harvesting Islamic risk premium with long–short strategies: A time scale decomposition using the wavelet theory

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