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Factor Investing and Asset Allocation: A Business Cycle Perspective

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This monograph draws heavily on the vast body of knowledge that has been built by financial economists over the last 50 years. Its goal is to show how to solve real‐life portfolio allocation problems. We have found that using a broad range of models works best. Also, we prefer simple over complex models. We believe that simplicity and modularity lend substantial robustness to investment analysis. Importantly, the framework presented provides several of the “missing links” in asset allocation—for example, the links between asset classes and risk factors, between macroeconomic views and expected returns, and ultimately between quantitative and fundamental investing.

About the Author(s)

Vasanttilak Naik

Vasanttilak Naik is an executive vice president and global head of empirical research for the portfolio management analytics group at PIMCO. Previously, he was managing director and head of the quantitative strategies group in fixed-income research at Nomura International. Dr. Naik also worked at Lehman Brothers and served as a faculty member in finance at the Sauder School of Business at the University of British Columbia. He holds a bachelor of commerce degree from Gujarat University, a postgraduate diploma in management from the Indian Institute of Management, and a PhD in finance from the University of California, Berkeley.

Mukundan Devarajan
Andrew Nowobilski
Sébastien Page, CFA
Sébastien Page CFA

Sébastien Page, CFA, is head of the Global Multi-Asset Division at T. Rowe Price. He oversees a team of investment professionals dedicated to actively managing a broad set of multi-asset portfolios, including the firm’s target-date franchise. Mr. Page is a member of the Asset Allocation Committee and the Management Committee of T. Rowe Price Group, Inc. Previously, he served as executive vice president at PIMCO, where he led a team focused on research and development of multi-asset solutions. Mr. Page has also served as a senior managing director at State Street Global Markets. He has coauthored three award-winning research papers for the Journal of Portfolio Management and two award-winning papers for the Financial Analysts Journal. Mr. Page is the author of Beyond Diversification: What Every Investor Needs to Know about Asset Allocation and coauthor of Factor Investing and Asset Allocation. He is a member of the Research Committee of the Institute for Quantitative Research in Finance (Q Group) and regularly appears in the financial media, including Bloomberg TV and CNBC. Mr. Page earned a bachelor’s degree in business administration and a master of science degree in finance from the Université de Sherbrooke.

Niels Pedersen