Anaelle Ubaldino, Head of Quant Advisory at Koris International, discussed the company’s proprietary model for timing factors with a focus on Low Volatility. Here are the three key takeaways.
1. Low Volatility stocks have a premium over the long-run, as well as defensive behavior during market stress. This makes them the ideal candidate for tactical strategies.
2. Koris developed a model of tactical tilts to factors, including Low Volatility, looking to identify periods of factor outperformance. The Low Volatility premium is expressed the most during market downturns so a prerequisite to time the Low Volatility factor is to anticipate deteriorating market conditions. Koris does so by considering signals from macro, market and factor variables in the model.
3. One of the main challenges of factor investing is implementation. Different factor construction methodologies can result in significant return discrepancies, meaning that one should pay attention to the specific methodology of the Factor Index used to implement these strategies.
You can view the replay of the presentation here or below.