Fund ExplorerIndicesInsightsVideosPricing

Factor Exposure Analysis 106: Macro Variables

Boosting the R2?

Nicolas Rabener
10 min read
20 Jun 2022

SUMMARY

  • Most investors treat factor and macro variables differently
  • Including macro variables improves a factor exposure analysis
  • Both should be considered simultaneously when analyzing investment portfolios

INTRODUCTION

The investment world is full of conundrums. For example, discussions on investment portfolios usually focus on the impact of change in inflation, interest rates, economic growth, and other macro variables. However, the most frequent type of portfolio analysis is a factor exposure analysis, where the exposure to equity factors like value or momentum is determined. Oddly, there are few follow on discussions on how value will perform and what the impact on the portfolio will be.

Keep reading with Institutional

Includes the full research library of 400+ articles, plus Returns Analyzer and Risk Analytics for return and risk contribution analysis.