International Diversification with Factor Funds

• Main Authors: Eun, Cheol S., Lai, Sandy, De Roon, Frans A., Zhang, Zhe
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2010
• Subjects: International diversification; Local factors; Factor funds; Finance and Financial Management; Portfolio and Security Analysis
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/2969; https://ink.library.smu.edu.sg/context/lkcsb_research/article/3968/viewcontent/LaiSZhangZ2010mnsc_pub.pdf
• Institution: Singapore Management University

We propose a new investment strategy employing “factor funds” to systematically enhance the mean-variance efficiency of international diversification. Our approach is motivated by the increasing evidence that size (SMB), book-to-market (HML), and momentum (MOM) factors, along with the market factor,...