Investors should switch between factors as alphas change; and are best off rebalancing as fast as the “inherent turnover of the alphas” dictates; according to Milind Sharma; who also asserts that systematic investors should switch in and out of factors as the alpha in those factors climbs and falls. To do this; Sharma uses a set of indicators combined with machine learning. To combat the crowdedness in traditional factors; Sharma created “enhanced” factors to act as the building blocks for its dynamic factor model. His enhanced smart betas and combinations of indicators are reshuffled daily; depending on earnings announcements.
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