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Strategic complementarity and substitutability of investment strategies

Doskov, Nikolay; Hens, Thorsten; Schenk-Hoppe, Klaus Reiner (2023). Strategic complementarity and substitutability of investment strategies. Swiss Finance Institute Research Paper 22-04, University of Zurich.

Abstract

Investors in equities tend to follow well-defined investment strategies based on characteristics such as market capitalization and dividend yield or factors such as size, value, momentum and quality which capture the cross-section of asset returns. In this paper, we explore the interaction of such investment strategies in a demand-driven framework. The aim is to quantify the impact of a reallocation of capital between strategies on the cross-section of their performance. The main finding is that self- and cross-impact caused by the reallocation of capital can explain capacity of strategies, correlation of returns and the cyclical nature of investment strategies’ risk premia.

Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Finance
Dewey Decimal Classification:330 Economics
Scope:Discipline-based scholarship (basic research)
Language:English
Date:18 July 2023
Deposited On:19 Sep 2023 14:18
Last Modified:20 Jun 2024 10:19
Series Name:Swiss Finance Institute Research Paper
Number of Pages:53
OA Status:Green
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.2139/ssrn.4003060
Other Identification Number:merlin-id:21832
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