Good Diversification is Never Wasted: How to Tilt Factor Portfolios with Sectors

13 Pages Posted: 20 May 2019

See all articles by Marie Briere

Marie Briere

Amundi Asset Management; Paris Dauphine University; Université Libre de Bruxelles

Ariane Szafarz

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi

Date Written: April 4, 2019

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 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: factors, sectors, portfolio diversification

JEL Classification: G11, C61, E44, G01

Suggested Citation

Briere, Marie and Szafarz, Ariane, Good Diversification is Never Wasted: How to Tilt Factor Portfolios with Sectors (April 4, 2019). Available at SSRN: https://ssrn.com/abstract=3382670 or http://dx.doi.org/10.2139/ssrn.3382670

Marie Briere (Contact Author)

Amundi Asset Management ( email )

90 Boulevard Pasteur
Paris, 75015
France

Paris Dauphine University ( email )

Université Libre de Bruxelles ( email )

Brussels
Belgium

Ariane Szafarz

Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB) & CERMi ( email )

50 Avenue Roosevelt
Brussels 1050
Belgium

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