An examination of the benefits of factor investing in U.K. stock returns
Fletcher, Jonathan (2018) An examination of the benefits of factor investing in U.K. stock returns. International Journal of Economics and Finance, 10 (4). pp. 154-170. ISSN 1916-9728 (https://doi.org/10.5539/ijef.v10n4p154)
Preview |
Text.
Filename: Fletcher_IJEF_2018_An_examination_of_the_benefits_of_factor_investing_in_UK_stock_returns.pdf
Final Published Version License: Download (435kB)| Preview |
Abstract
This study uses the Bayesian approach of Wang (1998) to examine the benefits of factor investing in U.K. stock returns in the presence of market frictions. My study finds that factor investing provides significant performance benefits when the benchmark investment universe is the market index, even in the presence of market frictions such as portfolio constraints and trading costs. However when the benchmark investment universe includes industry portfolios, market frictions, such as no short selling constraints and trading costs, tends to eliminate the benefits of factor investing. Imposing less restrictive portfolio constraints, factor investing can generate significant performance for investors with higher risk aversion levels.
ORCID iDs
Fletcher, Jonathan ORCID: https://orcid.org/0000-0003-0568-9145;-
-
Item type: Article ID code: 63394 Dates: DateEvent16 March 2018Published22 February 2018AcceptedSubjects: Social Sciences > Finance Department: Strathclyde Business School > Accounting and Finance Depositing user: Pure Administrator Date deposited: 27 Feb 2018 15:18 Last modified: 06 Oct 2024 00:31 Related URLs: URI: https://strathprints.strath.ac.uk/id/eprint/63394