Tradable Risk Factors for Institutional and Retail Investors
We construct tradable risk factors using combinations of large and liquid mutual funds (long leg) and ETFs (exchange-traded funds) (long and short legs), based on their holdings, for both retail and institutional investors. Exploiting a novel dataset, our tradable factors take into account ETF shorting costs. Assessing the performance of our tradable factors against standard “on-paper” factors, weWe construct tradable risk factors using combinations of large and liquid mutual funds (long leg) and ETFs (exchange-traded funds) (long and short legs), based on their holdings, for both retail and institutional investors. Exploiting a novel dataset, our tradable factors take into account ETF shorting costs. Assessing the performance of our tradable factors against standard “on-paper” factors, we