Abstract
We study the difference between the returns to the integrated approach to investing and those to the mixed approach to investing. Unlike the mixed approach, the integrated approach aggregates factor characteristics at the security level. Recent literature finds that the integrated approach dominates the mixed approach. Using statistical tools for robust performance testing, we demystify these findings as a statistical fluke. We do not find any evidence in favor of the integrated approach. What we do find is that the integrated approach exhibits a higher sensitivity to the low-risk anomaly. However, this reduction in risk does not lead to an improvement in performance.
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