Diversification across characteristics
AbstractI study long-short portfolio strategies formed on seven different stock characteristics representing various measures of past returns, value, and size. Each individual characteristic results in a profitable portfolio strategy, but these single-characteristic strategies are all dominated by a diversified strategy that places equal weight on each of the single-characteristic strategies. The benefits of diversifying across characteristic-based long-short strategies are substantial and can be attributed to the mostly low, and sometimes substantially negative, correlation between the returns on the single-characteristic strategies.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 986.
Date of creation: 2009
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