Journal of Finance
A fundamental insight in finance is that there is a risk-return tradeoff. Using a multifactor model to mitigate concerns about transaction costs and estimation risk, we challenge this view to show that investors can reduce risk by decreasing their exposure to equity factors when market volatility is high without sacrificing mean returns.
Alberto Martin-Utrera is an assistant professor of finance at the Ivy College of Business. His paper is published in the Journal of Finance.