Factors and Sectors in Asset Allocation: Stronger Together?
Marie Briere and
No 18-016, Working Papers CEB from ULB -- Universite Libre de Bruxelles
This paper compares and contrasts factor investing and sector investing, and then seeks a compromise by optimally exploiting the advantages of both styles. Our results show that sector investing is effective for reducing risk through diversification while factor investing is better for capturing risk premia and so pushing up returns. This suggests that there is room for potentially fruitful combinations of the two styles. Presumably, by combining factors and sectors, investors would benefit both from the diversification potential of the former and the risk premia of the latter. The tests reveal that composite strategies are particularly attractive; they confirm that sector investing helps reduce risksduring crisis periods, while factor investing can boost returns during quiet times.
Keywords: Investment; Asset allocation; Factor; Industry; Sector; Crisis (search for similar items in EconPapers)
JEL-codes: G11 G10 C52 D92 (search for similar items in EconPapers)
Pages: 25 p.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
https://dipot.ulb.ac.be/dspace/bitstream/2013/269054/3/wp18016.pdf Œuvre complète ou partie de l'œuvre (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:sol:wpaper:2013/269054
Ordering information: This working paper can be ordered from
http://hdl.handle.ne ... lb.ac.be:2013/269054
Access Statistics for this paper
More papers in Working Papers CEB from ULB -- Universite Libre de Bruxelles Contact information at EDIRC.
Bibliographic data for series maintained by Benoit Pauwels ().