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The mixed vs the integrated approach to style investing: Much ado about nothing?

Markus Leippold and Roger Rueegg

European Financial Management, 2018, vol. 24, issue 5, 829-855

Abstract: We study the difference between the returns to the integrated approach to style investing and those to the mixed approach. Unlike the mixed approach, the integrated approach aggregates factor characteristics at security level. Recent literature finds that the integrated approach dominates the mixed approach. Using statistical tools for robust performance testing, we demystify these findings as a statistical fluke. We do not find any evidence favouring the integrated approach. What we do find is that the integrated approach exhibits a higher sensitivity to the low‐risk anomaly. However, this reduction in risk does not lead to an improvement in performance.

Date: 2018
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Handle: RePEc:bla:eufman:v:24:y:2018:i:5:p:829-855