Ch.10 · Risk Measures and Ratios · hard
What is 'factor investing' or 'smart beta' in mutual funds?
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EXPLANATION
Smart beta / factor investing combines elements of active and passive investing. Instead of weighting stocks by market cap (traditional index), factor funds weight by specific factors — quality (ROE, low debt), value (low P/E, P/B), momentum, or low volatility. These factors have been shown to generate risk-adjusted outperformance over long periods in academic research.
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