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Factoring in Macro Uncertainties

Understanding the Risk and Return Profiles of Asia ex-Japan Factor Strategies.

Institutional investors use fundamental factors to create systematic portfolio strategies. To help investors construct better Asia ex-Japan portfolios, this Research Insight evaluates the behavior of factors in the new Barra Asia Pacific Equity Model (ASE2) under five forward-looking macroeconomic scenarios. This paper aims to answer these key questions: 1) What factors provide persistent systematic return in Asia ex-Japan equities? 2) How can investors capture these sources of systematic return in portfolios? 3) Which systematic factor strategies can investors use to take advantage of, or provide a hedge to, macroeconomic and market uncertainty?