At the right time, in the right factor. Can factors be timed?
|Author:||Bc. Jiří Nosek|
|Year:||2019 - summer|
|Leaders:|| Mgr. Martin Hronec
|Work type:|| Bachelors
|Awards and prizes:|
|Abstract:||This thesis examines the controversial prospect of Factor timing. We use
Thompson Reuters data that allow us to construct international risk-factors
and respective predictive signals and we test the capacity of these signals
to time factors using the Kelly Criterion formula to determine the optimal
fraction of capital to invest. Concerning the United States market, we showed
that among all signals that we used only the Value Spread seems to contain
some predictive power for all the factors in the study. All other timing
signals were almost uniformly disappointing and were unable to time any
of the factors. We further showed that timing strategies performed much
better in the intentional setting, often outperforming the passive buy-andhold approach.