Investing in a Multi-Asset Multi-Factor World
Alexandar Cherkezov (Invesco), et al.
August 31, 2017
In this article, we advance the use of factor investing across multiple asset classes. It turns out that style factors well established in the equity domain – such as value, momentum or quality – do extend to other asset classes as well. Even more so, multi-asset multi-factors significantly expand the investment opportunity set relative to a traditional multi-asset universe. Seeking to exploit this potential, we put forward an innovative diversified risk parity strategy that is designed to strive for maximum diversification in the multi-asset multi-factor world. To illustrate the strategy’s merits, we investigate its stylized facts vis-à-vis more standard allocation approaches.
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Trump says US will no longer tolerate “chronic trade abuses”: BBC
Differences within GOP on tax reform may delay (or derail?) bill: Politico
The odds for substantial tax reform don’t look promising: The Atlantic
US jobless claims rise more than expected for week through Nov 4: Reuters
This year’s stock market rally is all about earnings: MarketWatch
Buffett, Gates, and Bezos have more wealth than half US population: Fortune
Is another government shutdown lurking for the US? Fiscal Times
US Q4 GDP growth estimate holds steady at a solid 3.3%: Atlanta Fed

As horse races go, this one’s not even close. The momentum factor continues to leave the rest of the field in the dust for the major US equity factor strategies, based on the one-year trend via a set of ETFs.
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Trump gives China a pass for “taking advantage” of US on trade: CBS News
US firms announce trade deals with China during Trump’s trip: Reuters
CBO: GOP tax reform will raise federal deficit by $1.7 trillion over 10yrs: CNBC
China’s inflation rises to fastest pace in 9 months in October: RTT
Is the GOP’s hold on Congress at risk after Dem’s electoral victories? NY Times
Citigroup CEO says US gov’t may issue its own digital  currency: Bloomberg
Will EU use Brexit deadlock to force UK firms to relocate to Europe? Telegraph
Morningstar’s new style box profiles alt funds’ diversification benefits: M-Star
Conventional wisdom is wrong: ETFs have been tested under fire: Bloomberg

A widely followed measure of the Treasury yield curve dipped on Tuesday (Nov. 7) to its flattest level in a decade, based on daily data published by Treasury.gov. The gap between the 10-year and 2-year rates fell to 69 basis points yesterday – the lowest since Nov. 2007.
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Democrats score first electoral wins in Trump era: Politico
Trump’s agenda for his two-day China visit: trade and N. Korea: AP
China’s trade surplus with US narrows in Oct: Reuters
N. Korea dismisses Trump’s diplomatic outreach: CNN
Job openings in US remain strong in Sep: CNBC
Consumer credit rises in Sep, touching 10-month high: ABA Banking Journal
US economic growth has defied forecasts by the left: RCP
Economic confidence in US remains positive in Oct: Gallup

In previous installments of replicating indexes I profiled the style-analysis methodology and presented an example using a hedge fund index. Now let’s turn to a strategy of replicating the S&P 500 Index with a handful of stocks that are considered socially responsible investments (SRI).
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Trump in S. Korea talks of using military force if necessary: Reuters
Rising energy stocks help lift markets in Europe and Asia on Tuesday: WSJ
Is a war brewing between Saudi Arabia and Lebanon? Reuters
Global growth rate ticks up in October, according to survey data: IHS Markit
Eurozone growth is strong at start to Q4; job pace at decade high: IHS Markit
Hedge funds are a key force driving Bitcoin to a record $7400: NY Times
Crude oil rises to two-year high: Bloomberg

Broadly defined commodities posted the strongest gain for the major asset classes last week, based on a set of exchange-traded products. The advance marks the second time in as many weeks that commodities topped the performance list.
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More than two dozen killed in church shooting in Texas: CNN
Saudi prince with hefty US investments is arrested: LA Times
Trump in Asia says Japan is “winning” with free trade: USA Today
US commerce secretary kept investments linked to Russia, Putin: NY Times
US job growth rebounds in Oct but wage growth slows: Reuters
ISM Non-Mfg Index edges up to 9-year high in Oct: CNBC
US Services PMI in Oct points to “strong” growth: IHS Markit
Factory orders in US rise 1.4% in Sep: ABC News
Sep US trade deficit widens; 2017 on track to exceed 2016: Politico
House tax bill expected to add $2 trillion-plus in US debt: CRFB