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Dimitris Melas

Dimitris Melas
Managing Director, MSCI Research

About the Contributor

Dimitris Melas is responsible for equity research and strategic product development across both equity indexes and equity analytics. Dimitris leads a global team of research specialists. Prior to joining MSCI in 2006, Dimitris worked at HSBC Asset Management as Head of Research and Head of Quantitative Strategies. He is a Chartered Financial Analyst and holds an MSc in Electrical Engineering, an MBA in Finance, and a PhD in Applied Probability from the London School of Economics. He has published research papers in peer-reviewed journals and serves as Editorial Board Member of the Journal of Portfolio Management.

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Contributions by Dimitris Melas


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Showing 1 - 50 of 63 entries

  1. PAPER

    Factor Allocation Model: Integrating Factor Models and Strategies into the Asset Allocation Process 

    Apr 14, 2021 Dimitris Melas

    Asset Allocation and Asset Liability Management , Factor and Risk Modeling , Investing (Investment Management) , Performance Analysis , Portfolio Construction and Optimization

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  2. BLOG

    Investor Reaction to US Elections and COVID-Vaccine Progress 

    Nov 18, 2020 Dimitris Melas , David Lunsford , Andy Sparks

    Factor Investing , Risk Management , ESG Research

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    To gauge investor expectations after Joe Biden was declared winner of the U.S. election and good news broke about COVID vaccines, we surveyed 151 U.S.-based financial advisers. We examine the advisers’ views on the next 12 months and markets’ reaction since Election Day.

  3. BLOG

    Five lessons for investors from the COVID-19 crisis 

    May 19, 2020 Dimitris Melas

    ESG Research , Factors , Global Investing

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    COVID-19 unleashed a torrent of sharp movements across global financial markets. We highlight five key lessons for investors regarding global investing, managing factors, active management, indexed investing and ESG investing.

  4. The coronavirus pandemic sparked a surge of volatility across global financial markets. What lessons could investors draw from the COVID-19 crisis? In this paper, we present and discuss empirical evidence supporting five key lessons for investors regarding global investing, managing factors, active management, indexed investing and ESG investing.

  5. BLOG

    Coronavirus and oil hit equities — how low can we go? 

    Mar 12, 2020 Dimitris Melas

    Risk Management , Global Investing

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    We compare the market turmoil sparked by the coronavirus pandemic with levels of volatility, drawdown and recovery after 9/11 and the global financial crisis (the two other similarly severe economic and market shocks of the last 20 years).

  6. BLOG

    The state of global investing 

    Nov 12, 2019 Dimitris Melas

    Economic Exposure , Emerging Markets , Global Investing

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    Financial markets are inherently unpredictable, while structural forces such as shifts in monetary policy, trade conflicts and climate change compound the challenges facing investors. Read our analysis commissioned by Norway’s Ministry of Finance.

  7. BLOG

    Lessons from Woodford: Shutting the barn door after the horses have bolted 

    Jun 14, 2019 Dimitris Melas , András Bohák , Roman Kouzmenko

    Factor Investing , Factors

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    The suspension of the U.K.’s Woodford Equity Income Fund highlights the value of regularly reviewing a portfolio’s factor exposures and liquidity characteristics for signs of style drift or deteriorating ability to redeem shares.

  8. While used extensively by active managers as part of their security-selection decisions, the growth factor has been largely left out of the factor-index investing landscape, at least in its simplest form. This paper explores why and offers a way to capture this factor with a systematic, rules-based approach.

  9. PAPER

    The Future of Emerging Markets: 30 Years On from the Launch of the MSCI Emerging Markets Index 

    Apr 23, 2019 Dimitris Melas

    Investing (Investment Management) , Performance Analysis , Asset Pricing and Valuation

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    For the past 30 years, emerging markets have provided return enhancement and risk diversification opportunities for global equity investors. The ongoing liberalization of the domestic Chinese capital market has the potential to transform the characteristics of the equity segment and its role in global portfolios. Recently, emerging markets have experienced volatile performance, driven by changes in monetary policy, increasing political uncertainty and deteriorating conditions for international trade. Are these factors temporary or could they have a long-lasting impact? Will emerging markets remain a distinct asset class and will they continue to represent an essential portfolio allocation for international investors?

  10. Factors define the sources of portfolio risk and return. In this paper, we review the theoretical and empirical foundations of our factor research and factor models. MSCI factor research is firmly grounded in academic theory and empirical evidence. MSCI factor models are based on robust econometric techniques and reflect best investment practice. MSCI methodologies are transparent and publicly available. This is why the world’s leading institutional investors use MSCI factor models and analytics in their investment processes.

  11. Asset owners use indexes as policy benchmarks and reference portfolios in their asset allocation. Index investors track cap-weighted indexes that seek to capture the market return. Active investors select securities and build portfolios that aim to outperform the market. All these types of investors may be able to benefit from incorporating factors into their process. More importantly, they may also be able to integrate factors without compromising other fundamentally important aspects of their strategies. In this Research Insight, we examine options for these institutional investors. ©2019 Pageant Media. Republished with permission of IPR Journal, from “Integrating Factors in Market Indexes and Active Portfolios.” Dimitris Melas, Zoltán Nagy, Navneet Kumar, and Peter Zangari. Vol. 45, No. 6, 2019.

  12. BLOG

    How can active managers add factors to the portfolio? 

    Oct 2, 2018 Dimitris Melas

    Factors , Factor Investing

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    Discretionary managers use fundamental analysis to select stocks and construct portfolios that seek to beat the market. These managers face substantial headwinds in the current environment. From a business perspective, they are under pressure to reduce cost and improve performance. The market environment has also been challenging, as high correlations between stocks and the dominance of a handful of large technology companies have made it harder to generate alpha from stock selection.

  13. BLOG

    Why is Tesla a short-selling target? 

    Aug 13, 2018 George Bonne , Dimitris Melas

    Models/Client Cases , Integrated Risk Management , Factor Investing

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    Elon Musk, founder and CEO of Tesla, suggested in a series of tweets that going private could help Tesla avoid the scrutiny of quarterly reporting and pressure from short selling. Do companies targeted by short sellers share common characteristics? Could factor analysis help investors identify stocks that may become short-selling targets?

  14. PAPER

    Foundations of ESG Investing – Part 4: Integrating ESG into Factor Strategies and Active Portfolios 

    Jun 7, 2018 Laura Nishikawa , Guido Giese , Dimitris Melas , Zoltán Nagy , Linda-Eling Lee

    Investing (Investment Management) , Portfolio Construction and Optimization , Responsible Investing

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    How can ESG characteristics be integrated consistently across factor-based and active equity allocations? In Part 4 of the Foundations of ESG Investing paper, we discuss two approaches to applying ESG ratings to factor-based allocations – a one-step and a two-step approach – asking which has done a better job at combining the underlying strategy with ESG while maintaining exposure to target factors. We then investigate overlaying ESG ratings and ESG momentum on the historical holdings of nearly 1,200 actively managed global equity funds. What would have been the impact on their risk and return?

  15. PAPER

    Foundations of ESG Investing – Part 3: Integrating ESG into Indexed Institutional Portfolios 

    May 16, 2018 Guido Giese , Linda-Eling Lee , Dimitris Melas , Zoltán Nagy , Laura Nishikawa

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    According to recent surveys, asset owners’ have shifted their main focus to ESG’s financial benefits, as opposed to social benefits. In the third part of this paper, we discuss how ESG can be integrated into indexed allocations using MSCI ESG Ratings, which provided better risk-adjusted returns from August 2010 to December 2017 than the MSCI ACWI Index. We used existing best-in-class selection-based index methodologies (the MSCI ESG Leaders Index) for the creation of hypothetical global and regional indexed allocations replicating these indexes. We observed significant regional variations in ESG profiles and performance during our study period, but all showed a clear reduction in key risk measures. Part 3: ©2019 Pageant Media. Republished with permission of IPR Journal, from “Performance and Risks Analysis of Index-based ESG Portfolios.” Guido Giese, Linda-Eling Lee, Dimitris Melas, Zoltan Nagy, and Laura Nishikawa. Vol. 9, No. 4, 2019.

  16. BLOG

    How can active managers put ESG to work? 

    May 15, 2018 Dimitris Melas

    ESG Research

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    Our research shows how favorable ESG characteristics have historically had a positive impact on equity valuation, risk and performance. But many active managers may have concerns that using ESG data could disrupt their investment process and introduce unintended biases to the portfolio.

  17. BLOG

    Why index funds promote market efficiency 

    Apr 26, 2018 Dimitris Melas

    Global Investing

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    Institutions and individuals increasingly invest through funds that track indexes. While index funds bring transparency and low cost, their critics claim that they allocate capital indiscriminately, hurting market efficiency. Is this claim supported by the evidence? It is not. Our analysis shows that, far from damaging market efficiency, index funds1 facilitate active portfolio management by offering investors diverse and efficient tools to express investment views and implement active investment decisions.

  18. BLOG

    Putting the spotlight on Spotify: Why have stocks with unequal voting rights outperformed? 

    Apr 3, 2018 Dimitris Melas

    Global Investing

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    Nearly 15 years after Google’s initial public offering, the debate about listed companies that offer unequal voting rights to outside investors rages on. A number of high-profile technology companies including Dropbox Inc., Spotify and Snap Inc. have recently listed shares with unequal voting rights, adding fuel to the debate. Meanwhile, investors are trying to determine if they should shun the stock issued by these companies or include them in equity portfolios.

  19. BLOG

    Do factors stand up to FAANG? 

    Feb 21, 2018 Dimitris Melas

    Factors , Factor Investing

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    Large U.S. technology companies, the so-called FAANG, dominated the U.S. stock market in the last few years and had a significant impact on many investment strategies. These companies have been underrepresented in most factor-based strategies due to their unattractive factor characteristics. Have factor investors suffered from not investing in these stocks?

  20. BLOG

    Dissecting the stock market sell-off 

    Feb 6, 2018 Dimitris Melas


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    Growing fears about rising inflation and interest rates sparked a decline across equity markets in the last few days.

  21. Factors are important systematic sources of risk and return in equity portfolios. Given the pervasive use of factors via both active and indexed strategies, a standard approach is needed for defining factors and evaluating the factor characteristics of portfolios. We introduce MSCI FaCS, a classification standard and framework for analyzing and reporting of style factors in equity portfolios that is based on the Barra Global Total Market Equity Model for Long-Term Investors. Managers can use the framework to analyze and report factor characteristics, while investors and consultants can use its data to compare funds using common definitions.

  22. Many studies have focused on the relationship between companies with strong ESG characteristics and corporate financial performance.  However, these have often struggled to show that positive correlations — when produced — can in fact explain the behavior. This paper provides a  link between ESG information and the valuation and performance of companies, both through their systematic risk profile (lower costs of capital and higher valuations) and their idiosyncratic risk profile (higher profitability and lower exposures to tail risk). The research suggests that changes in a company’s ESG characteristics may be a useful financial indicator. ESG ratings may also be suitable for integration into policy benchmarks and financial analyses. Part 1: ©2019 Pageant Media. Republished with permission of IPR Journal, from “Foundations of ESG Investing: How ESG Affects Equity Valuation, Risk, and Performance.” Guido Giese, Linda-Eling Lee, Dimitris Melas, Zoltan Nagy, and Laura Nishikawa. Vol. 45, No. 5, 2019.

  23. We introduce a new integrated short interest factor that combines multiple dimensions of short interest. The new factor combines information on the amount of shorting activity in the securities-lending market, the available lending supply, the rates investors are paying to short a security (borrow rates) and an adjustment for shorting activity due to dividend arbitrage. We find that dividend-arbitrage strategies can create large biases in short interest factors, particularly in Europe. We also find that short interest is a robust factor that provides unique explanatory power in the cross section of stock returns beyond what is explained by other well-known factors in every major market region.

  24. BLOG

    Are Market Valuations in Nosebleed Territory? 

    Aug 22, 2017 Dimitris Melas

    Equity Themes , Fixed Income

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    Markets have enjoyed a relatively long period of positive returns and low volatility, making some investors wonder if a correction is imminent. One possible trigger for a correction would be investors concluding that market valuations have become extreme, which could lower future returns.

  25. Asset owners face a challenge in determining how the factor allocation fits into the overall equity program, in particular how the factor allocation relates to the existing roster of active managers. This paper uses a risk budgeting framework to investigate how active mandates and factor allocations can be combined. We address three key questions: 1) how does the level of active risk in active management affect the factor allocation decision, 2) what share of the portfolio can be deployed to the factor allocation and 3) what are the implications of a top-down versus a bottom-up factor allocation.

  26. BLOG

    Integrating ESG into Factor Portfolios 

    Nov 30, 2016 Dimitris Melas

    ESG Research , Factors

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    Over the past decade, many long-term institutional investors have incorporated Environmental, Social and Governance (ESG) considerations into their portfolios, by creating segregated ESG mandates or by incorporating ESG criteria across the entire portfolio.

  27. Integrating ESG criteria into equity portfolios raises important portfolio construction questions. For example, what is the impact of ESG on portfolio performance and characteristics? How does it alter the risk profile and the factor exposures of portfolios? How does it affect institutional investors’ ability to pursue their investment strategy?  Our results show that integrating ESG criteria into passive strategies generally improved risk-adjusted performance over the period 2007 to 2016 and tilted the portfolio towards higher quality and lower volatility securities. We then analyzed the effects of ESG integration on passive investing, factor investing (“smart beta”) and active portfolio management.

  28. BLOG

    Which Factors Are More Time-Sensitive? 

    Sep 28, 2016 Dimitris Melas


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    Hedge funds and other investors who manage portfolios that rebalance frequently face a challenge when it comes to the use of factors for trading, hedging and risk monitoring: Which factors tend to break down over time?

  29. BLOG

    Why economic exposure matters 

    Jul 21, 2016 Dimitris Melas

    Economic Exposure

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    Investors with global portfolios need to know where the companies they invest in are domiciled. It is equally important, however, for them to know where those companies earn their revenue. Data from MSCI shows that the geographic distribution of companies’ revenues can have a significant impact on their stock prices.

  30. BLOG

    How the Brexit vote may impact your portfolio 

    Jun 24, 2016 Dimitris Melas

    Risk Management

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    While the long-term consequences for investors of the decision by U.K. voters to leave the European Union may take time to unfold, our analysis of the months that preceded the referendum shows that tremors from Brexit already have stirred up markets and upped systemic risk for Britain compared with developed markets generally. The question now is whether the waves will continue and how they may (or may not) intensify.

  31. PAPER

    Using Systematic Equity Strategies: Managing Active Portfolios in the Global Equity Universe 

    Apr 18, 2016 Imre Balint , Dimitris Melas

    Factor and Risk Modeling , Investing (Investment Management) , Performance Analysis , Portfolio Construction and Optimization , Risk Management

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    Both quantitative managers and fundamental stockpickers need to understand their risk exposures, build efficient portfolios and differentiate themselves from their competitors. Factor models identify country, industry and style factors, which help forecast and explain portfolio risk. A subset of style factors, Systematic Equity Strategy (SES) factors — such as value, momentum and quality — has also earned positive long-term returns historically. In this paper, we review the role of SES factors in global portfolios and show how active managers can use these factors in an effort to differentiate their strategies and to enhance quantitative alpha models and fundamental security selection.

  32. BLOG

    Using Systematic Equity Strategies 

    Apr 18, 2016 Dimitris Melas

    Factor Investing

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    Top-down managers assess the economic outlook and translate macro views into country and industry portfolio positions. In contrast, bottom-up managers select securities based on a set of common criteria, for example valuations, profitability, growth, quality, yield, as well as company-specific attributes.

  33. BLOG

    Is momentum crashing? 

    Apr 8, 2016 Dimitris Melas

    Factor Investing

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    Momentum, the tendency of past winners to continue to do well in the near future, is a pervasive return regularity in equities and across asset classes. It is used both as a signal in alpha models and as a factor in risk models.

  34. BLOG

    Multi-factor strategies highlight benefits of diversification 

    Mar 14, 2016 Dimitris Melas

    Factor Investing

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    The cyclicality of factor strategies means that individual factors can deliver a premium against the market over time but that any one factor can experience periods of underperformance.

  35. Many institutional investors develop proprietary return forecasting models, but use third-party/alternative models such as the MSCI Global Equity Total Market Model to measure risk and transaction costs. While there may be a significant overlap between the factors used in alpha and risk models, at times they may be misaligned. For managers who optimize their portfolios, the optimizer will tend to amplify the component of alpha that is not aligned with the risk model; this may lead to unintended portfolio exposures and unnecessary trading. This Research insight describes a practical process for detecting and addressing misalignment between alpha and risk factors.

  36. BLOG

    Unpacking the volatility so far 

    Feb 18, 2016 Dimitris Melas

    Global Investing

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    The year that began in January stands out for the uncertainty that has rocked the global economy. The search for growth, the prospect of deflation and a slowdown in China have combined to roil financial markets and challenge asset owners and managers worldwide

  37. BLOG

    Constructing Low Volatility Strategies 

    Jan 25, 2016 Dimitris Melas

    Factor Investing

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    Low volatility is one of the few factors that have historically performed well in turbulent markets.

  38. Momentum, the tendency of past winners to continue to do well in the near future, is used widely in risk models, quantitative strategies and, more recently, as the basis for factor indexes aiming to replicate the performance of this pervasive factor. But the academic definition of momentum is extremely difficult to implement because it tends to lead to high volatility exposure and excessive portfolio turnover. Our approach involves selecting securities based on risk-adjusted performance and increasing rebalancing frequency only in periods of heightened market volatility. This approach has historically mitigated momentum crashes and reduced unnecessary turnover in momentum strategies.

  39. BLOG


    Dec 15, 2015 Dimitris Melas

    Factor Investing

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    Momentum, the tendency of past winners to continue to do well in the near future, is used widely in risk models and in quantitative strategies. Recently, momentum has also been the basis for factor indexes aiming to replicate the performance of this pervasive factor.

  40. PAPER

    Research Spotlight - The MSCI Diversified Multi-Factor Indexes 

    May 27, 2015 Padmakar Kulkarni , Dimitris Melas , Stuart Doole , Chin Ping Chia

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    Multi-factor indexes are important tools for institutional investors seeking diversified exposure to factors that have historically generated premia over long horizons. In this Research Spotlight, we examine the new MSCI Diversified Multi-Factor (DMF) Index family, which selects stocks with exposures to the value, momentum, quality and low size factors, while keeping risk at the level of the market.

  41. PAPER


    May 7, 2015 Padmakar Kulkarni , Stuart Doole , Chin Ping Chia , Dimitris Melas

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    Maximizing Factor Exposure While Controlling Volatility

    May 2015

    Multi-factor indexes are important tools for investors seeking diversified exposure to factors that have historically generated premia over long horizons.  In this Research Insight, we examine the new MSCI Diversified Multiple-Factor (DMF) Index family. These indexes combine four well-researched factors — value, momentum, size and quality — with a control mechanism designed to keep volatility close to the level of the market. We find that the DMF approach historically has allowed for efficient index construction by capturing the intended factor exposures and handling investor constraints. By optimizing exposures, these multi-factor indexes have produced high, persistent and controllable factor exposures from a focused selection of stocks.

  42. BLOG


    Dec 9, 2014 Dimitris Melas

    Factor Investing

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    Many institutional investors have struggled to determine the appropriateness of factors for their own plan, what role these allocations might play, which factors should be adopted and how factor indexes can be used.

  43. BLOG


    Apr 11, 2014 Dimitris Melas

    Factor Investing

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    We recently extended our simulated index factor history to 40 years, providing a unique set of data compared to others available in the marketplace. This extended history, combined with IndexMetrics, MSCI’s analytical framework, offers investors sharper tools for creating and analyzing portfolios.

  44. BLOG


    Apr 11, 2014 Dimitris Melas

    Factor Indexes

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    As we recently said in our post, systematic factors have historically been sensitive to macroeconomic and market forces but not in the same way. For example, some, such as Value, Momentum and Size have been pro-cyclical, meaning they outperformed when economic growth and volatility were rising.

  45. BLOG

    Factor Index Performance in Changing Economic Environments 

    Apr 11, 2014 Dimitris Melas

    Factor Indexes

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    Institutional investors have historically been concerned over the changing state of the economy and its impact on their investments whether it was about "Abenomics" or "taper tantrums." As a result, we are noting that they are increasingly taking changing macroeconomic conditions into consideration for their asset allocations.

  46. Using the lens of the Barra US Equity Model (USE4S), this Research Insight provides a practical guide to constructing investable factor portfolios. This paper begins by discussing the general concept of a factor portfolio. We then explore the role of optimization in making a 'pure factor portfolio' investable. We assess how investability constraints impact the performance of factor-replicating portfolios. Finally, we discuss how MSCI Market Neutral Barra Factor Indexes can be used in an investment process to track factor returns.

  47. PAPER

    Deploying Multi-Factor Index Allocations 

    Dec 3, 2013 Madhusudan Subramanian , Subramanian Aylur , Dimitris Melas , Jennifer Bender

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    Factor investing has become a widely discussed part of today’s investment canon. This paper is the second in a three-paper series focusing on factor investing. In the first paper, "Foundations of Factor Investing," we discussed six factors - Value, Low Size, Momentum, Low Volatility, Yield, and Quality - that historically have earned a premium over long periods, represent exposure to systematic sources of risk, and have strong theoretical foundations. We also discussed how they can be captured through indexation. In this paper, we turn to the question of how institutional investors interested in factor investing may allocate to and across factors.

  48. BLOG


    Dec 3, 2013 Dimitris Melas

    Factor Indexes

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    Let’s look at how factor allocations fit in the traditional institutional portfolio setting. Factor investing utilizing indexes can be viewed as active decisions implemented through passive replication. As such, factor allocations should be tailored to each institution.

  49. PAPER

    Foundations of Factor Investing 

    Dec 3, 2013 Dimitris Melas , Jennifer Bender , Subramanian Aylur

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    Factor investing has become a widely discussed part of today’s investment canon. This paper is the first in a three-paper series focusing on factor investing. In this paper we lay out the rationale for factor investing and how indexation can capture factors in cost-effective and transparent ways.[1]

    [1] The next papers series cover various aspects of implementation including use cases we have seen.

  50. PAPER

    Research Spotlight - Foundations of Factor Investing 

    Jan 31, 2013 Dimitris Melas , Remy Briand , Subramanian Aylur

    Investing (Investment Management)

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    This paper discusses the rationale for factor investing and how indexe can be constructed to reflect factor returns in cost-effective and transparent ways. We currently identify six equity risk factors that have historically earned a long-term risk premium and represent exposure to systematic sources of risk: Value, Low Size, Low Volatility, High Yield, Quality and Momentum.

Showing 1 - 50 of 63 entries