Did you ever wonder why we talk so much about sectors when it comes to investing and financial markets’ behavior? In this paper, we dig deeper into how sectors are usually classified and how this could be improved in an “out of the box” fashion:
– How is GICS methodology applied to sectors and what are the limitations?
– How to potentially better capture risk exposures using correlations?
– What are the advantages of a correlation-based sector classification approach?
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