Good Diversification is Never Wasted: How to Tilt Factor Portfolios with Sectors
Posted: 9 Mar 2021
There are 2 versions of this paper
Good Diversification is Never Wasted: How to Tilt Factor Portfolios with Sectors
Date Written: 2020
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: Por[comma separated]tfolio management, asset allocation, factor, industry, sector, crisis
JEL Classification: G11, C61, E44, G01
Suggested Citation: Suggested Citation
