Inter-temporal risk parity is a strategy which rebalances between a risky asset and cash in order to target a constant level of risk over time. When applied to equities and compared to a buy and hold strategy it is known to improve the Sharpe ratio and reduce drawdowns. We used Monte Carlo...

In this paper we consider the question of how to improve the efficacy of strategies designed to capture factor premiums in equity markets and, in particular, from the value, quality, low risk and momentum factors. We consider a number of portfolio construction approaches designed to capture...

We considered five risk-based strategies: equally-weighted, equal-risk budget, equal-risk contribution, minimum variance and maximum diversification. All five can be well described by exposure to the market-cap index and to four simple factors: low-beta, small-cap, low-residual volatility and...

Cross-sectional factor regressions have been used to model the cross-section of stock returns in terms of factors exposures. We illustrate the difficulties of implementing such models in practice for the purpose of managing multi-factor portfolios. First, the orthogonalisation of factors...

Under an assumption of normality, we explore a non-orthogonal Bayesian technique in which redundant information can in principle be filtered out of the posterior distribution by the explicit coupling of the prior and likelihood functions. The Black-Litterman forecasting model widely used by...