Effective Factor Management with Analytical Precision

Authors: Cheung, W. and Mishra, M.

Publisher: SSRN


Factors are popular handles on which portfolio and risk managers can express investment and risk views. In the equity world, portfolio managers (PM) often face the dilemma of trading off intentional factor tilts against unintentional factor skews. For example, a Banks tilt generates an unintentional exposure to Credit Risk, and a Value style has a built-in Size bias, etc. Traditional mitigation often resorts to ad hoc manual adjustments without a consistent theoretical ground and analytical control. In this article, we introduce an integrated yet transparent framework for effective factor management.

Source: Manual