Rational Factor Rotation

A QWAFAFEW discussion led by,

Lawrence Pohlman, PhD

Abstract:

We study a Factor Rotation investment strategy that provides a substantially higher annualized return than that of the aggregate market. We start by showing that the optimal investment strategy for rational investors is factor rotation. We then illustrate the impact on portfolio performance by an investment strategy of rotating positions in the Fama French factors using a Markov Switching model based upon the VIX. Performance can be further improved by estimating switching models for each of the FF factors.

Bio:

Lawrence Pohlman, PhD has a distinguished career covering 30 years of experience in equity, fixed income and asset allocation.

He regularly speaks at professional conferences and is widely published in prominent journals.

He has taught Investments, Corporate Finance, Fixed Income Management and Advanced Derivatives at Columbia Business School, Northeastern University and University of Massachusetts Boston.

Larry was the Director of Research at BMO Global Asset Management, Chief Investment Officer at BNP Paribas Investment Partners, Director of Research at Wellington Management, Director of Research at PanAgora Asset Management, Director of Fixed Income Research at Independence Investment Associates, Vice President at Blackrock Financial Management and Associate in Mortgage Securities Research at Goldman Sachs & Co.

He holds 5 degrees (BS Nuclear Engineering, MS in Operations Research, MBA Finance and Management Science, MPhil Finance, PhD Finance) from Columbia University and is a member of the American Finance Association, Boston Security Analysts Society, Econometric Society, the Chicago Quantitative Alliance, QWAFAFEW and MENSA

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Time: 7:00 PM sharpe

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Steerage Committee:
Hugh Crowther
Dan diBartolomeo
Mike Dunn
Steve Gaudette
Sri Krishnamurthy
Mark Kritzman
John Minahan
Donna Cool Murphy
Larry Pohlman
Dan Potter
Dan Rie
Evan Schulman
Michael Schwartzman
Michael Wilcox

The members of the Steerage Committee are responsible for coordinating the program content.

Program suggestions from members are always welcome.