Quality Assurance: De-Mystifying the Quality Factor in Equities and Bonds

22 Pages Posted: 5 Dec 2017

See all articles by Jennifer Bender

Jennifer Bender

State Street Global Advisors

Ritirupa Samanta

State Street Global Advisors

Date Written: August 9, 2016

Abstract

This paper focuses on the cross-asset class properties of Quality as a factor, particularly its joint behavior across equities and fixed income. The aim is to provide further insight Quality, a relatively newer factor, and to shed light on the implications for portfolio allocation. The results show that the correlation between quality variants in equities and fixed income is actually lower historically than that between equities and fixed income core benchmarks. A 60/40 allocation to the quality cross-asset-class mix offers a statistically significant return with lower tail risk reflecting the greater possible diversification benefits from factor allocations compared to traditional cap-weighted allocations.

Keywords: Quality, Multi-Asset Class, Equities, Bonds, Factor Investing

Suggested Citation

Bender, Jennifer and Samanta, Ritirupa, Quality Assurance: De-Mystifying the Quality Factor in Equities and Bonds (August 9, 2016). Available at SSRN: https://ssrn.com/abstract=3080352 or http://dx.doi.org/10.2139/ssrn.3080352

Jennifer Bender (Contact Author)

State Street Global Advisors ( email )

1 Lincoln Street
28th Floor
Boston, MA 02111
United States

Ritirupa Samanta

State Street Global Advisors ( email )

One Lincoln Street
Boston, MA 02111-2900
United States

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