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Factor Investing on Country Level

Away with Stocks?

Nicolas Rabener
10 min read
27 Aug 2019

SUMMARY

  • Investors can harvest returns from common equity factors on country level
  • Returns are consistent when combined into a multi-factor portfolio
  • Performance of some factors is comparable to those on single stock level, indicating common drivers

INTRODUCTION

Factor investing strategies like Value are relatively easy to explain, but complex in implementation. Creating long-short factor portfolios requires investors to define the universe of stocks, portfolio size, weighting methodology, metrics for ranking the stocks, and the rebalancing frequency. The stocks in the short portfolio need to be available for borrowing, which requires the availability from a stock lending desk.

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