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When it Rains, it Pours: Multifactor Asset Management in Good and Bad Times

Marie Briere and Ariane Szafarz

No 21-002, Working Papers CEB from ULB -- Universite Libre de Bruxelles

Abstract: We examine the profitability of multifactor portfolios on the U.S. stock market. Using passive sector investing as the benchmark, we assess the performances of factor-based asset management strategies in good and bad times. When short selling is unrestricted, factor investing outperforms sector investing in all respects. For long-only portfolios, our results reveal a trade-off between the risk premia associated with factors and the diversification potential of sectors. Multifactor investing tends to be more profitable than the benchmark during good times but less attractive during bad times, when diversification is needed the most.

Keywords: Portfolio management; asset allocation; factor; industry; sector; crisis (search for similar items in EconPapers)
JEL-codes: C61 E44 G01 G11 (search for similar items in EconPapers)
Date: 2021-02-10
New Economics Papers: this item is included in nep-cwa, nep-fmk and nep-mac
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