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1.
Style investing is a kind of factor investing that deals with _______.
Two factors -- size (large-small) and value (value-growth).
2.
Once researchers identify an investment strategy that replicates alpha, what will happen to that alpha?
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.
3.
Factor investing includes the study of _______.
All of the above. These factors and a few more are studied in factor investing.
4.
What is one consequence of factor-based investing?
The hurdle for being declared a truly skilled manager has risen over time. Today, studies looking for evidence of skill in equity mutual funds control for exposure to size, value, and momentum factors. In other words, if a manager's excess returns come during times that value, smaller-cap, or momentum stocks outperform, the procedure will adjust the "excess" return to zero.
5.
What is a factor?
An attribute of an asset that both explains and produces excess return. An attribute of an asset that both explains and produces excess return.
