Asymmetric rotation of risk factors in a global portfolio
George A. Christodoulakis
Purpose – The purpose of this paper is to examine the asymmetric dynamic rotation of beta coefficients to global investment style factor shocks in the Morgan Stanley Capital International (MSCI) universe of assets and its implications for investment management. Design/methodology/approach – The paper uses an asymmetric extension of the Christodoulakis and Satchell approach of time varying beta coefficients. Findings – Evidence suggests that positive (negative) style factor shocks tend to be associated more with increases (decreases) in beta coefficients rather than the reverse. Research limitations/implications – There is a need to examine other forms of beta rotation and the degree of common persistence and empirical applications to investment management and portfolio performance attribution. Practical implications – Forecast the evolution of beta. Persistent positive or negative shocks could spark rotating investment exposures, particularly relevant during turbulent periods in which asset managers may engage onto tactical asset allocation strategies. Originality/value – The paper explores the asymmetric rotation of style factors in the MSCI universe of assets. The results can be used in applied investment management involving dynamic asset allocation strategies.
Accounting, Assets, Beta factor, Data analysis, Investments
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