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Factor investing in Brazil: Diversifying across factor tilts and allocation strategies

Author

Listed:
  • Alexandre Alles Rodrigues

    (IESEG School of Management Lille)

  • Fabrizio Casalin

    (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

Abstract

We employ a methodology to construct multi-beta multi-strategy (MBMS) indices for the Brazilian equity market that can diversify the exposure to multiple rewarded risk factors and unrewarded strategy-specific risks. We do so by considering as many as six risk factors, and five allocation strategies. Empirical results show that the MBMS indices so obtained outperform the cap-weighted benchmark index in both absolute and risk-adjusted terms. We also show that the same indices have a higher probability of outperforming the market than the individual multi-strategy factor indices, and that such outperformance is persistent over time.

Suggested Citation

  • Alexandre Alles Rodrigues & Fabrizio Casalin, 2022. "Factor investing in Brazil: Diversifying across factor tilts and allocation strategies," Post-Print hal-03968011, HAL.
    • Handle: RePEc:hal:journl:hal-03968011
    DOI: 10.1016/j.ememar.2022.100906
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    More about this item

    Keywords

    Factor Investing ; Factor diversification ; Model diversification ; Strategy-specific risks ; Double-layered diversification ; Emerging equity market;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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