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500
Portfolios 506:
Factor Investing
Test your knowledge
Choose wisely. There is only one correct answer to each question.
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Review your answers below to learn more.
1.
Rational factor theory deals with how the market prices _______.
Choose wisely. There is only one correct answer.
Returns
Risks
Momentum
Risks. Factor investing is thus about finding the optimal portfolio of factor risks.
2.
Factor investing includes the study of _______.
Choose wisely. There is only one correct answer.
Momentum
Quality
Low volatility
Only two of the above
All of the above
All of the above. These factors and a few more are studied in factor investing.
3.
What is beta?
Choose wisely. There is only one correct answer.
An attribute of an asset that both explains and produces excess return
Excess returns attributed to manager skill
How strongly an asset's returns move with the market's returns
How strongly an asset's returns move with the market's returns. How strongly an asset's returns move with the market's returns.
4.
Style investing is a kind of factor investing that deals with _______.
Choose wisely. There is only one correct answer.
One factor -- size (large-small)
One factor -- value (value-growth)
Two factors -- size (large-small) and value (value-growth)
Two factors -- size (large-small) and value (value-growth).
5.
Once researchers identify an investment strategy that replicates alpha, what will happen to that alpha?
Choose wisely. There is only one correct answer.
It will become beta.
It will grow more comprehensive.
It will be augmented.
Nothing, actually
It will become beta. What was once considered alpha will become beta (or perhaps some other factor) once it is replicated by a known strategy.
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