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Bridge over ocean
1 May 2015 Financial Analysts Journal Volume 71, Issue 3

The Crash Risks of Style Investing: Can They Be Internationally Diversified?

  1. Timothy K. Chue
  2. Yong Wang
  3. Jin Xu

The crash risks of momentum tend to be higher than those of size and value.
International diversification lowers the crash risks of size and value but not
momentum. The authors examined the conditional correlations and return
co-exceedances of style portfolios across countries and found that this
difference in the effect of diversification is due to the left (right) tails of
momentum (size and value) portfolios being more correlated than the right (left)
tails across countries.

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