Rising Sector and Style Influences on Global Equity Portfolios

38 Pages Posted: 27 Jun 2003

See all articles by Wenling Lin

Wenling Lin

Office of Comptroller of Currency

Lisa Kopp

Frank Russell Company

Phillip Hoffman

Frank Russell Company

Mark Thurston

Frank Russell Company

Date Written: November 26, 2002

Abstract

This paper investigates how recent market and manager developments - including rising sector risk, reduction in managers' country bets, and greater influence of investment style on managers' stock/sector views - change the hierarchy of global equity's active risk drivers and multi-manager portfolio construction. Using cross-sectional regressions and multi-manager portfolio simulations, we find a shift from the dominance of country risk to style and sector risk. We also find style-balanced portfolios substantially reduce active risk after 1999, mostly in stock/sector selection. Given changing influences of risk factors, this study suggests constructing a portfolio with multi-factor (style, sector, and country) risk-controlled strategies.

Suggested Citation

Lin, Wenling and Kopp, Lisa and Hoffman, Phillip and Thurston, Mark, Rising Sector and Style Influences on Global Equity Portfolios (November 26, 2002). Available at SSRN: https://ssrn.com/abstract=410190 or http://dx.doi.org/10.2139/ssrn.410190

Wenling Lin (Contact Author)

Office of Comptroller of Currency ( email )

400 7th Street SW
Washington, DC 20219
United States

Lisa Kopp

Frank Russell Company

909 A Street
Tacoma, WA 98402
United States

Phillip Hoffman

Frank Russell Company

909 A Street
Tacoma, WA 98402
United States

Mark Thurston

Frank Russell Company

909 A Street
Tacoma, WA 98402
United States

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