Long-Only Style Investing: Don't Just Mix, Integrate

19 Pages Posted: 2 Jul 2016 Last revised: 23 Oct 2017

See all articles by Shaun Fitzgibbons

Shaun Fitzgibbons

AQR Capital Management, LLC

Jacques Friedman

AQR Capital Management, LLC

Lukasz Pomorski

AQR Capital Management, LLC

Laura Serban

AQR Capital Management

Date Written: October 20, 2017

Abstract

We investigate two popular approaches to long-only style investing that are often considered as potential starting points for smart beta investors: the “portfolio mix” that builds a style portfolio from standalone style portfolios and the “integrated portfolio” that integrates styles directly in the portfolio construction process. Our key finding is that integrating styles is a much more effective way to harvest long-only style premia. Compared to the portfolio mix, the integrated portfolio substantially improves returns and information ratio by avoiding stocks with offsetting style exposures and including stocks with balanced positive style exposures.

Keywords: smart beta, factors, long only, portfolio construction, implementation, value, momentum

JEL Classification: G10, G11

Suggested Citation

Fitzgibbons, Shaun and Friedman, Jacques and Pomorski, Lukasz and Serban, Laura, Long-Only Style Investing: Don't Just Mix, Integrate (October 20, 2017). Journal of Investing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2802849 or http://dx.doi.org/10.2139/ssrn.2802849

Shaun Fitzgibbons

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Jacques Friedman

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Lukasz Pomorski (Contact Author)

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Laura Serban

AQR Capital Management ( email )

Greenwich, CT
United States

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