Download it once and read it on your kindle device, pc, phones or tablets. Factor investing, andrew ang 121720 linkedin slideshare. In this paper, we discuss the rationale for factor investing and how indexes can be constructed to reflect factor returns in. The group optimizes factors to help meet investment outcomes, such as retirement savings, factor advisory mandates. The focus in this paper is only on equity style factors, as opposed to macro factors or other multiasset factors. Andrew ang, phd, managing director, is head of factor investing strategies and leads blackrocks factorbased strategies group. By exploiting the interaction of assets with each other, so one assets gains can make up for another assets losses, diversification allows investors to increase expected returns while reducing risks. To determine which factors that we should choose, factor investing asks. The book provides a very complete overview of the entire field of investing, and its evolution over the past 4050 years. Our goal is to provide a broad overview of factor investing as a framework that incorporates factorexposure decisionmaking into the portfolio construction process. It attracted fresh interest after the publication of a report on active portfolio management, produced by ang et al. Discussion of the promises and pitfalls of factor timing.
A systematic approach to factor investing, professor andrew ang presents a comprehensive, new approach to the ageold problem of where to put your money. From traditional to alternative risk premia harvesting june 2016 it is now well accepted that the performance of active mutual fund managers can, to a large extent, be replicated through a static exposure to traditional factors see for example ang, goetzmann, and schaefer 2009 analysis of the norwegian. A systematic approach to factor investing by andrew ang 9. As an example of the latter, in 2011, nbim initiated an operational reference portfolio orp designed to harvest factor premiums over long horizons. Factors and the future andrew ang, head of blackrocks factorbased strategies group eileen dowling, head of blackrocks global consultant relations and institutional product group salim ramji, head of blackrocks us wealth advisory business. Factor investing has emerged from the asset management world as the new paradigm for longterm investment. We identify three approaches to implement factor investing in the portfoliomanagement process and discuss implementation issues. These factors include value, momentum, quality, and size, among others. A systematic approach to factor investing, ang upends the conventional wisdom about asset allocation by showing that what matters arent asset. Asset management andrew ang oxford university press. Environmental, social, and governance esg signals are an important part of factorbased investing strategies as they can stem from. Factor investingbuilding portfolios with exposure to macroeconomic or statistical factors that explain the return differences between securitiesis as old as the.
The first risk factor to be identified is the market factor, which delivers the socalled market premium. There are many factor strategiesvaluegrowth investing, momentum, and short volatility strategies, to name but a fewthat beat the market. Kaplan professor of business at columbia business school. In this expanding ecosystem of factor based products, there is a common misconception that factor investing is very simple, providing superior results to traditional funds e. This buys equity when stock prices rise and sells equity when stock prices falls. A plethora of factor index construction methods have been proposed in the academic literature. Andrew ang, head of blackrocks factor investing capabilities 1.
A systematic approach to factor investing published by oxford university press in 2014, is a comprehensive guide showing how factor risk premiums can be harvested in portfolio design and incorporated in all aspects of investment management. A systematic approach to factor investing financial management association survey. Factor investing the voices of influence special issue 2017 the journal of portfolio management quantitative strategies. Factors, not asset classes factor premiums dont come without risk. Peterson, andrew ang the journal of portfolio management oct 2017, 44 1 3043. Unprecedented market volatility has rattled markets. This book upends the conventional wisdom about asset allocation by showing that what matters arent asset class labels but the bundles of. This article is the first in a series on factor investing. Answering helps her reap longrun factor premiums by embracing risks that lose money during bad times, but make up for it the rest of the time with attractive rewards. Facts and fantasies about factor investing thierry roncalli.
A simple multifactor portfolio based on the results of factor screening can offer better return than a portfolio built by analyzing companies in. The group optimizes factors to help meet investment outcomes, such as retirement savings, factor advisory mandates and bespoke factor solutions. The definition of factors and factor investing the authors define a factor as an attribute relating a set of securities returns. Norwegian fund should go beyond equities and bonds in its asset allocation.
By andrew ang, phd, ked hogan, phd, and justin peterson. A call option can be dynamically replicated by a long stock position and a short bond position. In the optimal case, the amount of factor risk would be informed by the preferences of the asset owner, the norwegian people. Factor investing and trading costs alpha architect. Factor investing factor investing 2 inadequate and policymakers put on further programs to stabilize the financial system. If you think those are the things to focus on in building an investment portfolio, andrew ang has accumulated a body of research that will prove otherwise.
An overview of factor investing fidelity investments. Some investors question the very existence of factor premiums. Foundations of factor investing december 20 2 of 33 executive summary factor investing has become a widely discussed part of todays investment canon. However, now that factor investing has gone mainstream via etfs, the debate has broader interest among the investing public. Raw strategies approach factor construction by overweighting. A systematic approach to factor investing financial management association survey and synthesis by andrew ang pdf, epub ebook d0wnl0ad in asset management. Use features like bookmarks, note taking and highlighting while reading asset management. He leads blackrocks factorbased strategies group which manages macro and style factor multiasset funds. Financial management association survey and synthesis series mortgage valuation models. Factor timing with crosssectional and timeseries predictors philip hodges, ked hogan, justin r. Meanvariance investing is all about diversification. Angs career has focused on understanding the nature. Embedded options, risk, and uncertainty financial management. Asset management a systematic approach to factor investing.
A systematic approach to factor investing financial management association survey and synthesis kindle edition by ang, andrew. Approach to factor investing financial management association survey and synthesis pdf. These two approaches led to a new paradigm called factor investing ang, 2014. Years of experience as a finance professor and a consultant have led him to see that what matters arent asset class labels, but instead the bundles of.
Andrew ang and knut kjaer investing for the long run. Exploring a fundamental question in factor investing investments. February 2009 was the lowest cumulated return marked in figure 14. Review of the active management of the government pension. Answering this question helps an investor reap longrun factor premiums by embracing risks. Buy asset management a systematic approach to factor investing financial management association survey and synthesis by ang, andrew isbn. Everyday low prices and free delivery on eligible orders. Private equity long stocks, short bondsreal estate long stocks, long bonds. Making clear the factor exposures allows better communication of the risks being taken by active management. While still in its early development and changing over time, nbim has made. Total portfolio factor, not just asset, allocation robert bass, scott gladstone, and andrew ang 20170515159235437899. Years of experience as a finance professor and a consultant have led him to see that what matters arent asset class labels, but instead the bundles of overlapping risks.
A systematic approach to factor investing find, read and cite all the research you need on researchgate. Request pdf on mar 6, 2017, riccardo rebonato and others published asset management. Implementation from a regulatory perspective is included next, followed by our conclusions and a checklist for embedding factor investing in the portfolio management. Factor timing with crosssectional and timeseries predictors. Pdf asset management by andrew ang vusala eynullayeva. A systematic approach to factor investing, professor andrew ang presents. Head of factorbased strategies factors can help meet portfolio objectives.
December 31, 2015 page 1 andrew ang columbia business. Factor investing factor investing factor value neutral growth 0. Its about empowering investors to deliberately and directly access ideas to help achieve their financial goals. Factor investing, and the associated intellectual battles, have raged for decades in academic finance journals.
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