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Diversification All the Way Down

Diversification has been called the only free lunch in investing, but many portfolios are less diversified than they appear because equity risk dominates. In addition, within equities, a broad portfolio is often dominated by a single factor, and many factor portfolios are still built around a single style.

To address this issue Anthony Renshaw , Yurong Gu , Matt Candar , and Andrew Ang , authors of the July 2026 paper “ Diversification all the Way Down : Multifactor Investing Within Factors, Across Factors and Across Time, examined a multifactor portfolio that applies diversification at multiple levels.

Within factors, with each factor being a composite of several signals so that no single metric dominates.

Across factors, with four factors being combined and no one factor allowed to dominate.

Across time, with…