As is the case within major asset classes, the benefits of diversification weaken when most needed.
In Table 1, we report the summary statistics for the six factors across all regions, and the evidence appears mixed: no single investment strategy displays excess returns that are uniformly significant across the eight regions.
In particular, momentum is statistically weak in the United States and Japan, the two largest markets in terms of capitalization.
The region-specific component reflects potentially uncompensated risk, which can be diversified away by simply investing across national markets.
In Table 3, we evaluate the performance of the global components of the market, value, size, momentum, investment, and profitability factors.