We refine the approximate factor model of asset returns by distinguishing between natural rate factors, whose sum of squared factor betas grow at the same rate as the number of assets, and semi-strong factors, whose sum of squared factor betas grow to infinity, but at a slower rate. We...

This paper develops a two-step semiparametric methodology for portfolio weight selection for characteristics- based factor-tilt and factor-timing investment strategies. We build upon the expected utility maximization framework of Brandt (1999) and Aït-sahalia and Brandt (2001). We assume that...