Purpose In capital markets, research risk factor loadings and characteristics are considered as opposing explanations for the cross-sectional dispersion in average stock returns. However, there is little known about the performance an investor would obtain who believes either in the...

Since the subprime crisis, portfolios based on risk diversification are of great interest to both academic researchers and market practitioners. They have also been employed by several asset management firms and their performance appears promising. Since they do not rely on estimates of expected...