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The mixed vs the integrated approach to style investing: Much ado about nothing?
Author(s) -
Leippold Markus,
Rueegg Roger
Publication year - 2018
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/eufm.12139
Subject(s) - nothing , style (visual arts) , anomaly (physics) , econometrics , sensitivity (control systems) , computer science , mathematics , engineering , epistemology , geography , physics , philosophy , archaeology , condensed matter physics , electronic engineering
We study the difference between the returns to the integrated approach to style investing and those to the mixed approach. Unlike the mixed approach, the integrated approach aggregates factor characteristics at security level. Recent literature finds that the integrated approach dominates the mixed approach. Using statistical tools for robust performance testing, we demystify these findings as a statistical fluke. We do not find any evidence favouring the integrated approach. What we do find is that the integrated approach exhibits a higher sensitivity to the low‐risk anomaly. However, this reduction in risk does not lead to an improvement in performance.