Login
The economic benefits of market timing the style allocation of characteristic-based portfolios

David Ardia, Kris Boudt & Marjan Wauters

Résumé Many exchange traded funds track simple characteristic-based equity portfolios such as the market capitalization, the fundamental value or the inverse volatility portfolio. This paper provides theoretical and empirical evidence for the economic benefits in exploiting the timing-gains that result from the time-varying relative performance of these characteristic-based portfolios. Under a factor model for expected returns, we show that this dynamic portfolio allocation can be efficient across the low-dimensional set of characteristic-based portfolios. We assess the out-of-sample performance on the S&P 100 universe over the period 1990–2013 and show gains in stability and significant positive risk-adjusted returns for the dynamic style portfolio. We conduct several robustness tests and extensions confirming the benefits of dynamic style allocation across characteristic-based portfolios.
   
Mots-clés Exchange traded funds; Factor models; Portfolio choice; Stock characteristics; Style investing
   
Citation Ardia, D., Boudt, K., & Wauters, M. (2016). The economic benefits of market timing the style allocation of characteristic-based portfolios. The North American Journal of Economics and Finance, 37, 38-62.
   
Type Article de périodique (Anglais)
Date de publication 2016
Nom du périodique The North American Journal of Economics and Finance
Volume 37
Pages 38-62
URL http://www.sciencedirect.com/science/article/pii/S1062940...
Liée au projet Dynamic proportion portfolio insurance, smart beta invest...