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Enhanced factor investing in the Korean stock market

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  • Kim, Saejoon

Abstract

A comprehensive examination of long-only factor investment strategies for the Korean stock market is presented. Negative exposures to unintended factors that detract from the expected factor risk premium are identified. These constituents with large negative exposures are then removed from the factor portfolio that establishes substantial performance improvement in factor-based investing. Results show that risk premia exist for the size, value, momentum, profitability and low risk factors in the Korean market with the size factor producing the largest return.

Suggested Citation

  • Kim, Saejoon, 2021. "Enhanced factor investing in the Korean stock market," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:pacfin:v:67:y:2021:i:c:s0927538x21000652
    DOI: 10.1016/j.pacfin.2021.101558
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    References listed on IDEAS

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    Cited by:

    1. Hyuksoo Kim & Saejoon Kim, 2024. "Estimating Asset Pricing Models in the Presence of Cross-Sectionally Correlated Pricing Errors," Mathematics, MDPI, vol. 12(21), pages 1-21, November.

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    More about this item

    Keywords

    Factor investing; Factor risk premia; Factor exposure; Multifactor portfolio; Korean stock market;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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