New Scientific Beta publication highlights the importance of sector risk in factor investing and the importance of deciding whether to control it or not

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In a new publication entitled "," ERI Scientific Beta researchers focus on the implicit sector risk taken by smart factor indices and analyse the implications for their short- and long-term risk-adjusted performance.

Focusing on a comparison between standard smart factor indices and their sector-neutral counterparts, the authors highlight several key findings:

The authors conclude that the choice of using the sector-risk-control option is a trade-off between investors’ aversion to short-term risks generated by sector risk and their willingness to harvest factor risk premia in the most efficient way, to achieve the highest risk-adjusted performance over the long run.

The white paper can be downloaded through the following link:

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Globe Newswire: 06:31 GMT Friday 14th September 2018

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