Test your knowledge

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Keep studying!

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Style investing is a kind of factor investing that deals with _______.

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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).

Once researchers identify an investment strategy that replicates alpha, what will happen to that alpha?

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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.

What is a factor?

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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

An attribute of an asset that both explains and produces excess return. An attribute of an asset that both explains and produces excess return.

Factor investing includes the study of _______.

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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.

Research has found that the stronger the factor attribute (such as momentum, quality, etc.), _______.

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The lower the excess return

The higher the excess return

There is no relationship between the factor attribute and excess return

The higher the excess return. The stronger the factor attribute, the higher the excess return.

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