What Financial Conditions Affect Dynamic Equity Risk Factor Allocation?

The “technology bubble” in the late 1990s, financial crisis 2007/2008, and Eurozone generated significant losses across several asset classes. objective of this paper is to investigate risk premia factors such as size, value, momentum, carry, quality, low volatility their time-variant behavior. behavior these baskets has been analyzed based on different conditions: business cycle, yield curve, equity market conditions. Factor calculations are MSCI World universe. monthly data set ranges from January 1995 September 2017. results underpin prevalent observation that consistently outperform broad therefore generate alpha. However, shows a dynamic allocation can achieve an attractive return–risk relation. study very clearly how behave conditions more offensive or conservative diversified, equally-weighted portfolio.