Asset allocation

A map to building factor-based portfolios

November 28, 2023

A series of bar charts compares the efficiency of cap-weighted and signal-weighted portfolios in exposures to the value, momentum, and quality factors. Signal-weighted portfolios often need lower allocations to those factors. For value, the cap-weighted portfolio requires a 30% allocation versus 19% for the signal-weighted portfolio. For momentum, the cap-weighted portfolio requires a 30% allocation versus 22% for signal-weighted. For quality, the cap-weighted portfolio requires a 30% allocation versus 27% for signal-weighted.

Contributors

Victor Zhu
Haifeng Wang

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