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Portfolios 506: Factor Investing

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1.
Factor investing includes the study of _______.
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All of the above. These factors and a few more are studied in factor investing.
2.
Rational factor theory deals with how the market prices _______.
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Risks. Factor investing is thus about finding the optimal portfolio of factor risks.
3.
Style investing is a kind of factor investing that deals with _______.
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Two factors -- size (large-small) and value (value-growth).
4.
Once researchers identify an investment strategy that replicates alpha, what will happen to that alpha?
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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.
5.
Research has found that the stronger the factor attribute (such as momentum, quality, etc.), _______.
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The higher the excess return. The stronger the factor attribute, the higher the excess return.