This is a first try at dynamic monthly allocation based on stock-level dollar flow.
In this iteration, the factor objective function maximizes orthogonalized factor scores whose "expected returns weights" are determined by aggregate flow imbalances. Factors receiving higher dollar flow receive positive signal and are overweight. Lower flow - under-/negative weight.
Custom Data shows how factor allocation signals have evolved over time.
- objectively, the strategy reaps most outperformance by calling cyclical vs. defensive factor hard switch in 2009. Although, its allocation most recently has also been successful.
