On the Relevance of Variances and Correlations for Multifactor Investors
研究了多因子投资组合中，平均方差和平均相关性哪个更能预测短期风险与收益，发现只有平均方差有效，提醒投资者警惕基于错误关系的波动率管理策略。
Investors believing in diversification across multiple orthogonal risk factors should prioritize factor variances over correlations when evaluating conditional portfolio risk. This study decomposes the variance of an equally weighted multifactor portfolio into two components, average variance (AV) across and average correlation (AC) between factors, and shows that only AV predicts future multifactor risk and return over the short run, therefore supporting the idea of short-term persistence in risk and a variance-in-mean relationship uncovered only when focusing on AV. The results show robustness in various instances and caution investors to bet on a dysfunctional variance-in-mean relationship by forming a volatility-managed multifactor portfolio.