Investing in the size factor
研究了规模因子在投资组合构建中的作用，提出动态扩展模型，利用利率期限结构、市场风险厌恶和投资者情绪等状态变量优化权重，实证发现动态策略在经济困难时期明显优于静态规模因子。
This paper investigates the role of the size factor for constructing investment portfolios and proposes a dynamic extension that accommodates the risk-free asset and time-varying weights. These weights are determined by a set of state variables given by the term structure of sovereign interest rates, variables describing market risk aversion such as the VIX index and the CRB Industrial return, and indexes reflecting investor sentiment towards the economic outlook. The empirical section explores the suitability of these state variables and analyses the out-of-sample performance of size factors idiosyncratic to the US, the UK and European financial markets that are compared against the dynamic version that optimizes the weights in each period. The results provide support to the different size factors except for periods of economic distress in which the optimal dynamic strategies are clearly superior.