Investing in Europe with Style: Why Investors in Europe Would Benefit from Constructing Portfolios Through the Prism of Style

This chapter presents the fact that style indexes have not gained as much popularity in Europe as they have in the United States. Until recently, equity markets in Europe were fragmented, with many investors possessing a strong home‐country bias. That fragmentation caused a practical problem with creating style indexes. Europe is becoming a more integrated market with virtually all of the developed European countries participating in the European Union and most of the largest economies being a part of the Eurozone. One can sensibly view Europe as a whole for the purpose of creating equity style indexes. Even over a period of less than a decade, style effects can matter enough to investors in European stocks. This is why it is believed that investors in Europe could benefit by looking at equity portfolio construction through the prism of style rather than just geography.