Shift in Factor Investing: An Empirical Study in India Bijoy Kumar1,*, Kedia Aman2 1Associate Director, Department of Distance and Continuing Education, University of Delhi, Delhi, India, (E-mail: associatedirector@col.du.ac.in) 2Senior Consultant, Quantitative Advisory Services, Ernst & Young, London, United Kingdom, (E-mail: aman.kedia1111@gmail.com) *Corresponding author E-mail: associatedirector@col.du.ac.in
Online Published on 02 February, 2024. Abstract The study during back-testing on individual factors and the alpha model finds the significant existence of abnormal return opportunities in the Indian market. For developing alpha models, Sharpe ratio, advanced optimization techniques such as multiple regression and support vector machine have been used with Macroeconomic variables as explanatory variables. Alpha models have provided better results than individual factors regarding performance statistics. This study also considers survivorship, forward-looking, and confirmation biases to make results more applicable for investment decisions and addresses different anomalies like low volatility, size, etc. Lastly, we have observed factors’ behavior and opportunities during the normal market regime and tilt in factor investing from the long-short to more implementable side of the long-only portfolio from the 2008 global crisis to post-demonetization to the (Covid-19) pandemic era. Finally, using the factor picking model, investment strategies have been suggested. Hence, market players may benefit from such opportunity gaps. Top Keywords Portfolio Management, Back-testing, Factor Investing, Multiple Regression, Support Vector Machine (SVM), Survivorship Bias. Top |