Over Two Centuries of Global Factor Premiums

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A new paper by Guido Baltussen, Laurens Swinkels and Pim van Vliet at the Dutch asset manager and quant powerhouse, Robeco, analyzed global multi-asset factor premiums over an unprecedented sample of 217 years. The findings are important and timely enough to warrant a summary.

The new paper, titled “Global Factor Premiums” examines global equity indexes, 10-year government bond indexes, commodities and currency markets to understand how well the most pervasive, persistent, economically significant and investable style premia hold up on a very long out-of-sample dataset. Specifically, the authors study global multi-asset trend, momentum, value, carry, seasonality, and betting-against-beta (BAB) premia on monthly data back to 1799.

The authors focused exclusively on multi-asset factors, since other authors have already published extensive research on factor persistence in individual securities. For example, Golez and Koudijs examined stock and bond returns back to 1629; Goetzmann and Huang analyzed stock momentum in Imperial Russia from 1865-1914; and Geczy and Samanov (2013) showed “Two Centuries of Price Return Momentum” in U.S. securities.

The novel contributions from this paper are the following:

  • Replication of seminal studies dealing with multi-asset premia over the period 1981-2011 using a uniform testing methodology to mitigate the potential impact of p-hacking from different implementation methodologies;
  • The introduction of more rigorous statistical tests based on the Bayesian perspectives on p-values advocated by Cam Harvey; and
  • An application of uniform testing methodologies to examine factor premia over a very long out-of-sample dataset including the period 1799-1980 and 2012-2016.