Good diversification is never wasted: How to tilt factor portfolios with sectors

Marie Brière and Ariane Szafarz

Finance Research Letters, 2020, vol. 33, issue C

Abstract: Using large-cap exchange-traded funds (ETFs), this paper provides guidance on enhancing the performance of long-only factor portfolios through sector-based blending. The blending method builds ETF portfolios that optimize the factor exposure of sectors. We use the original factors of Fama and French (F&F) as benchmarks. The results show that blended portfolios combine the diversification benefits of sector investing with the risk premia of factor investing, and so constitute a promising extension of pure factor ETFs.

Keywords: Portfolio management; Diversification; Exchange-traded fund (ETF); Factor; Sector; Blending (search for similar items in EconPapers)
JEL-codes: C61 E44 G01 G11 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Working Paper: Good Diversification is Never Wasted: How to Tilt Factor Portfolios with Sectors (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:33:y:2020:i:c:s154461231930491x

DOI: 10.1016/j.frl.2019.05.015

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