1
Q
Equity Securities Provide Benefits
A
- Capital Appreciation
- Dividend Income
- Diversification
- Hedge against inflation
2
Q
ESG Investing
A
- Negative Screenings: exclusionary screening
- Positive Screenings: uncover companies that area in favor (best in class)
- Thematic Investing: screen based on a theme
- Impact Investing: More actively engaged with companies the Portfolio manger is investing in.
3
Q
Approaches to Segmenting an Investment Universe
A
- Size: measured by market capitalization
- Style: Value, growth, or core (blend)
- Geography: developed markets, emerging markets, and frontier markets
- Economic Activity
Economic Activity:
* Market Orientated Approach
* Production Orientated Approach
4
Q
Segmentation by Size and Style
A
Advantages: for portfolio managers:
* Can construct a portfolio in a manageable way.
* Diversification across economic sectors and industries.
* Can construct performance benchmarks for specifics.
* Reflects a company’s maturity and potentially change its growth/value orientation.
Disadvantages:
* Categories may change over time
* May be defined differently by different investors.
5
Q
Equity Segmentation by Geography
A
Benefits: can facilitates global diversification
Weaknesses:
* May provide lower than expected exposure to a specific market because companies are global in nature.
* Potential currency risk investing in foreign equity markets.
6
Q
Economic Activity Approach
A
Advantage:
* Can create portfolio benchmarks for a specific industry or sectors
* Diversification benefits
Disadvantage: Some companies don’t have pure business lines (product, service, sectors, or industries)
7
Q
Income Strategies
A
- Dividends
- Optional Stock Dividend
- Special Dividend: One-time cash payment
- Security Lending
- Writing Call Options
- Cash Secure Put
- Dividend Capture
8
Q
Security Lending
A
- Collateral: Lender will earn some income from an reinvestment return of the treasuries or cash.
- Earn a Fee
- The lender will still get the dividend on the stock
- The lender gives up voting rights
Issues:
* If there is a lot of short selling in the security lent, is not beneficial to the lender.
* Quality of the borrower and ability to return the securities.
* Lender relinquishes the right to vote the shares during the loan period.
9
Q
Different Fees and Costs
A
- Management & Performance Incentive Fees: Direct cost of research and costs of portfolios
- Administrative Fes: voting, corporate action, custodian, depository, and registration
- Marketing and Distribution Fees: Marketing, sales, advertising, sponsorship, producing & distributing brochures, platform fees, and sales commissions
- Trading Costs: incorporated into a portfolio’s total return and included in the overall performance
- Investment Strategy Costs
10
Q
Investment Strategy Costs
A
Momentum Strategy: Demand liquidity in the market place, but time & delay and slippage costs go down.
Contrarian Strategy: Opposite of a momentum strategy and will supply liquidity in the market place.
11
Q
Shareholder Engagement
A
- Interacting directly with company to influence stock price in the future
- Vote on things in general meeting
- Effect for a company stock price to go up
12
Q
Free Riders
A
Shareholder who benefit from shareholder engagement actions but don’t contribute anything
13
Q
Limitations (Issues) of Shareholder Engagement
A
- Active equity managers are more likely than passive equity managers to be involved
- Larger investors (with deep pockets) are more likely to be involved
- If successful “free riders” will benefit as well.
- Focuses on short-term goals rather than long-term goals.
- Can lead the investor to acquiring material non-public information
- Shareholder engagement can create potential conflicts of interest
14
Q
Rational for Active management
A
- Confidence in Portfolio Manager
- Preference for active management
- Mandate from a Client: Criteria, set standards, religion, or ESG
15
Q
Criteria when Selecting a Benchmark
A
- Rules Based: Rules must be objective, consistent, and predictable
- Transparent: Methodology, rules, publicly available, clearly understandable
- Investable: Can you buy all the securities? Return and risks performance
16
Q
Buffering
A
- Buffer Zone: If a stock should move from one index to another
- Makes the transition a more gradual and orderly process
- Establishing ranges around breakpoints
17
Q
Items Needed to Select a Benchmark
A
- Rules Based: Including or excluding securities
- Rebalancing: Consistent objective, predictable
- Consideration: Choosing a benchmark
- Market Exposure Desired
- Idea Methods: Constructing and maintaining
18
Q
Types of Indexes (Weights)
A
- Market Capitalization
- Fundamental
- Equal weight
- Price
19
Q
Price Weighted
A
- Same number of shares of each stock in the index (1 share of each stock). An example is the Dow Jones
- Issues: Higher-priced stock impacts the overall index more
- Impacted by stock dividends or splits.
20
Q
Market Capitalization
A
- Price of the shares x number of shares outstanding
- Most indexes use this method such as the S&P & EFAI
- Issues: Large-cap stock that have a higher capitalization will dominate
- Liquidity-weighted: Large-caps will have more liquidity
- Check to see if the index is float adjusted or not - Most are Free-Float Adjusted
21
Q
Free Float adjusted
A
- Without the index may be less investable.
- Excludes shares not available to the public (founders, government, or other companies)
- More accurately reflects the actual liquidity it does not lower its liquidity
22
Q
Equally Weighted
A
- Regardless of the price or shares of the stock because the same amount is invested in each stock.
- Issues: Prices are volatile thus, rebalancing because very frequent.
- Small-Cap Bias: The lower the price will have more shares.
- There could be limited investable capacity due to the heavier weight in small-caps.
- Least concentrated index portoflio based on HHI.
23
Q
Fundamental Weighting
A
- A certain factor is selected such as dividends, cash flows, P/E….etc.
- The idea is that there will be a reversion to the mean based on fundamental attributes.
24
Q
Ways of Creating a Passive Portolfio
A
- Passive Market Capital Weights: Track an index by a subset or all securities at a low cost
- Passive Factor-Based Strategies (Smart Beta): Portfolio with exposures to certain factors as in an index (tracks the risk factors)
25
Common Risk Factors
* Growth
* Value
* Size
* Yield
* Momentum
* Quality
* Volatility
26
Types of Passive Factor-Based Strategies
**Return-Oriented Strategies:**
* Momentum
* Dividend Yield
* Fundamentally-weighted strategies
**Risk-Oriented Strategies:**
* Volatility Weighting
* Minimum Variance Investing: Portfolio with the highest return and the lowest risk.
**Diversification-Oriented Strategies:**
* Equally-weighted portfolios
* Maximum diversification strategies
27
Approaches of Passive Equity Investing
1. Pooled Investment Funds: ETFs and Mutual Funds
2. Derivative Strategies: Currency and derivative overlay
3. Separately Managed: Index-based SMAs
28
Opened-Ended Mutual Funds
* Redemptions are at the end of the day
* Advantages: lower costs more convenient and more liquid than ETFs
* Disadvantages: Taxes on redemption of sale of shares within the fund is a taxable event to all fund holders
29
ETFs
**Advantages:**
* Only taxable event are dividends or when the individual investor sales their own shares
* They are easy to trade (intraday ).
* Investors can buy ETFs using margin borrowing.
* Investors can take a short position in ETFs.
* Track more indexes than index mutual funds.
* Can be more tax-efficient than index mutual funds
* Typically have lower expense ratios
**Disadvantages:**
* Commission costs may offset the expense ratio advantage
* Market illiquidity when buying/selling.
* Less liquid
* Higher transactions cost
* Higher trading commissions
30
Derivative Overlay
* **Completion Overlay:** Take the portfolio as it is right now and move back to the index risk exposure. This is to try and match the beta of the index
* **Rebalancing Overlay:** Match reconstitution of the index as securities are added or deleted
* **Currency Overlay:** Add the foreign currency risk that the portfolio is exposed to.
31
Pros vs Cons of Derivative Overlay Positions
**Advantages:**
* Quick, cheap, and effect to adjust the exposures of the portfolio
* Trade in very liquid markets
* Much easier to leverage a portfolio
**Disadvantages:**
* Expiration dates: Need to rollover periodically
* Contracts: Some of them have position limits
* Special Portfolio Needs
* Over the Counter: Addition counterparty credit risks
* Basis Risk: Leads to tracking errors future and spot rates, might not be the same
32
Equity Index Swaps
**Used to obtain market exposure synthetically**
**Advantages:**
* Flexibility : Possible to initiate on any equity index
* Are a low-cost alternative to cash-based approaches
* They can be used to leverage or hedge a position.
**Disadvantages:**
* Counterparty default risk
* Liquidity risk: Customized swap transactions are illiquid
* Interest rate risk: By paying the floating interest rate.
* Tax policy risk: Tax laws giving favorable tax treatment now might change
33
Index Matching Strategies
* Full rebalancing
* Stratified Sampling
* Optimization
* Blended
34
Full Replication
* The portfolio mirriors the index
* Might have a very high cost
* Works well with a very liquid and small number of securities
* Cash flows are difficult to replicate
* Lowest Tracking Error and Active Risk
35
Stratified Sampling
* This strategy will not own all the stock in the index, creates a situation where the risks are as same as the index.
* Holds a subset of the securities in the index.
* Mutually exclusive and mutually exhaustive
* The more dimensions used, the smaller tracking error
36
Optimization
**Advantages:**
* Typically involves maximizing a desirable characteristic or minimizing an undesirable characteristic
* Lower Tracking error than stratified sampling
* Take into account correlation and covariance of each stock in the portfolio
**Disadvantages:**
* Historical data and relationships can change
* Created portfolio might not be mean variance efficient
37
Blended
Can use a mixture such as full replication to a degree, then use stratified and/or optimization
38
Tracking Error
Defined as the standard deviation of its excess return.
**Differcnes are From:**
* Management Fees
* Use of sampling
* Commissions: such as bid-ask spreads
* Liquidity: high transaction costs
* Use of Intraday trading costs
* Cash Drag
39
Active Equity Strategies
* Factor Based: Have a higher concentration risk.
* Activism
* Statical Arbitrage
* Fundamental
* Quantitative
40
Fundamental
* This strategy is based on opinion “discretionary”
* Researchers will use financial statements to forecast the future
* There will be fewer positions, but large amounts invested per security in the portfolio
* Risks: What if the analyst is wrong, using a wrong model, or misvaluing the intrinsic value of a stock
41
Quantitative
* This strategy uses models and are heavily rules based “systematic”
* Must have a manager that can identify a large amount of data that analyze all type of data
* Objective in nature, will use models to select positions based on historical data
* There will be more positions, but small amounts invested per security in the portfolio
* Risks: The factor betting on does not delivery
42
Bottom-Up Investing
Starts from the individual stocks, then sectors, then industries, and finally the markets
There are 2 types: (There are also sub styles)
* Value-Based
* Growth-Based
43
Value Based
**Identify and select stocks trading at a significant discount to intrinsic value**
* **Relative Value:** compare price multiples, looking for undervalued stocks and compare them to the industry
* **Contrarian:** Shares recently out of favor purchased with the hope of price recovery
* **High Quality Value:** Emphasis on intrinsic value to find evidence of good management, financial strength, and profitable in the long run
* **Income Investing:** Focus on high dividend paying stocks with high dividend growth
* **Deep-Value Investing:** Looking for extremely low-price multiples
* **Special Situations:** Identify mispricing from spin-offs, mergers, etc…
* **Restructuring and Distressed Debt Investing:** Investing in a company before or after a bankruptcy.
44
Growth-Based Approaches
**Identify companies that are expecting to grow faster than the market**
* Consistent Long-Term Growth: Continuous growth in the future
* Growth at a Reasonable Price (GARP)
* Short-Term Earnings Momentum
45
PEG Ratio
* Used to quantify a unit of growth from the P/E ratio.
* The lower the better
* The issue is that it assumes that there is a linear relationship with growth and the P/E multiple which is not always the case
46
Top-Down Strategies
* Starts from the overall markets, then industries, then sectors, then the individual stocks
* Focus on the overall Macro-Economic variables, they use broad market variables
* Dimensions: These can be long or short term in nature.
47
Rewarded Factors
* Factors that have a positive correlation with a long-term positive risk premium
* Taking exposures to a factor due to exposure should have a higher positive return
* If there is no intuitive sense, back-testing will turnover spurious relationships that have no value.
48
Hedge Portfolio Approach
**Long-Short Portfolio: follows a certain process – Steps:**
1. Rank the entire universe based on the factor selected
2. Divide the universe into quantiles (top 5%)
3. Long the best quantile and short the worst quantile
4. Look at performance, represent the favor overtime
**Limitations of a Long-Short Approach:**
1. If the best performing quantile is in the middle it would be lost.
2. Assuming relationship between the factor and returns are linear
3. If the factors are correlated with each other the benefits from diversification are less than anticipated.
4. Assumes the ability to short sell. If not, it can only be tilted.
5. Is not a pure portfolio, and will have significant exposers to other factors
49
Factor Timing
* Sub-category of factor investing
* Equity style-rotation: the portfolio manager believes different will outperform at different times.
50
Factor-mimicking portfolios (FMPs)
Theoretical long-short, dollar-neutral portfolios with exposure to a specific factor only and no exposure to other factors.
51
Factor-tilting portfolios
Long-only approaches using a form of enhanced indexing in which the manager tracks an index and makes factor-based bets.
52
Activist
“Specialist” that takes positions and stakes in a company and push for change in a company to increase the price of the stock.
**What they Want:**
* Board representation or nominating board members
* Engaging with management
* Attending the annual general meeting with suggestions of change
* Launching “breach of fiduciary” legal proceedings
* Joining with other shareholders to demand action
* Launching a media campaign to reform
53
Activist Investor Target Strategies
* Financial reforms that better utilize investor capital, change dividends, or share buybacks
* Realigning management compensation with share price performance
* Unlock value by spinning off divisions or divesting subsidiaries
54
Typical Defense Aganist Activits
1. Create multiple class share structure for multiple votes or founder control
2. Poison Pill Defense: Allows current shareholders to buy more shares at a discount
3. Staggered Board: Board is voted periodically not all at once
55
Statical Arbitrage
“Mean Reversion” make use of the technical data to makes moves on efficiency in the market place.
56
How to Create Fundamental Activists Strategy
1. Define the investment universe and market opportunity
2. Pre-screen the universe of securities and create a set of securities for further detailed analysis
3. Understand each of the companies selected analyze the industry, competitive position, and financial reports
4. Forecast the performance (earnings and/or cash flows)
5. Convert forecast into valuations
6. Create a portfolio with the appropriate risk profile including top-down views and constraints
7. Rebalance portfolio as needed
57
Pitfalls in Fundamental Active Investing
* **Behavioral Biases:** Effect judgment and fundamental strategies
* **Value Trap:** Buying companies that are below their intrinsic value, but they do not rise.
* **Growth Trap:** The favorable prospects are overpriced in the stock a small or minor fall in growth can hit the stock drastically.
58
Creating a Quantitative Active Investment Strategy
1. Define the market/investment opportunity
2. Acquire and Process Data
3. Back-testing the Strategy
4. Evaluating the Strategy: Take an out of sample testing to create a more robust model
5. Portfolio Construction
59
Information Coefficient (IC)
Provides a linear relationship description of effectiveness in generating holding period returns or other target variables.
60
Pearson IC
* Examines the factor relationship with current period and next-period performance and, as a correlation measure, ranges from –1 to +1.
* Sensitive to any type of outliers.
61
Spearman Rank IC
* Modifies the Pearson IC to describe the relationship between ranked factor scores and ranked forward returns.
* Not influenced as heavily by outliers and, more robust relationship data.
62
Pitfalls in Quantitative Active Investing
1. Survivorship Bias
2. Look-Ahead bias
3. Data-Mining
4. Turnover
5. Transaction Costs
6. Lack if Available Stock to Borrow
7. Quant Overcrowding
63
Return-Based Style Analysis
* Examines return characteristics from several style indexes to determine the manager's style
* Regress a funds past returns against the past returns for a number of style indexes
* Easier to implement than holdings-based analysis because data are more readily available.
* It can only be positive, and must sum up to 1.
* Coefficient Determination (R2): How much the determination in Y is explained by the regression.
* Error Term = 1 - R2 = What is not explained
* Benefits: Shows if the portfolio manager is pursuing the same style that they are stating
64
Holdings-Based Style Analysis
* Allows for a deeper level of analysis because it uses the actual portfolio holding.
* The analysis more accurate and generates more information for making style allocation decisions.
* Better for capturing style drift or a change in the portfolio quicker
* Facilitates the comparison of individual positions.
* Methodology of verifying a portfolio style
* Issues: There can be “window dressing” as the holdings report might be lagging
65
Contribution of Active Risks & Returns to the Total Portfolio Value
* Active Return: benefit from active management (rp - rb)
* Active Risks: standard deviation of the active return
* Information Ratio: Active Return ÷ Active Risk “ex post” this looks at the return on the benchmark net of the risk-free rate.
66
Sources of Active Return
1. **Strategic Exposures:** “Long-Term” to rewarded factors (size, value, growth, market risk (beta)) This is market risk exposure
2. **Tactical Exposures:** “Short-Term” to mispriced sectors, securities, and rewarded risk (factors) that generate alpha. The is value-added alpha
3. **Idiosyncratic Risk:** Returns generated from luck. This could be random noise and shocks
67
Main Building Blocks Used in Portfolio Construction
1. **Factor Weightings:** Active return due to beta differences between the portfolio and the benchmark
2. **Alpha skills:** Factor timing; Based on manager ability to over or under-weight specific risk factors.
3. **Position Sizing:** Diversification vs concertation
68
Rewarding Factors Weightings
* Beta is the difference between portfolio and the benchmark
* Manager taking exposures to different risk factors other than the benchmark.
* Beta refers to the sensitivity to a reward risk factor.
* Due to exposures being more available to regular investors, they are no longer considered to be a source of alpha.
69
Unrewarded Factors
* Timing correction industry exposures
* Commodity prices
* Geographical
* Security selection
70
Breadth of Expertise
* How many independent investment decisions does the manager make using different sources of information.
* Managers that have broader expertise liekly generate more constant alpha.
71
Information Coefficient (IC)
* The correlation between the manager forecasted return and their actual realized returns.
* You can regress the returns to give a picture of how well they did.
72
Manager active risk (σRA)
The standard deviation of the active return
73
Transfer Coefficient (TC)
Number between zero and 1 to give how much a manager is constrained
* 0 if constrained
* 1 if unconstrained
74
Approaches to Construct Actively Managed Portfolios
* **Systematic or Discretionary:** Looking at the degree to which the manager is following a set of systemic rules instead of discretionary judgment
* **Bottom-Up or Top-Down:** Degree and way how the manager looks at the macroeconomically factor to the induvial company.
75
Portfolio Construction
Can be viewed as an optimization problem with a goal.
**Can be stated to a benchmark:**
* Absolute Term: Just the portfolio, “statistics”
* Relative Term: Relative to a benchmark
76
Active Share
* Difference of weights between the portfolio vs the benchmark
* There are decisions to underweight or to overweight
* Measures the average degree to which the number or sizing between the difference, between 0 and 1
* If the portfolio is the same weight as the benchmark it would be 0
* If there is a complete difference between both the active share would be 1
* If 2 funds charge the same fees you would want a higher level of active share.
77
Differences in Active Risk and Active Return
* Active Risk = Tracking risk or Standard deviation of the active return.
* Active Return Impacted by the degree of securities correlations. However active risk is not.
* A manager can completely control active return, but not active risk.
* Actual realized return can be very different than the expected active return.
78
Manager styles
* Stock Picker: High Active Share; High Active Risk
* Sector Rotator: High or Low Active Share; High Active Risk
* Concentrated Factor Bets: High Active Share; Medium Active Risk
* Diversified Factor Bets: Medium Active Share; Medium Active Risk
* Factor Neurtal: Medium Active Share; Low Active Risk
* Closet Indexer: Low Active Share; Low Active Risk
* Pure Indexing: 0 Active Share; 0 Active Risk
79
Risk Budgeting
The process which the total risk portfolio is allocated to factors or positions in the portfolio.
**There are 3 factors to keep in mind:**
* Active Risk Limitations
* Absolute Risk Limitations
* Risk Implications of Leverage
80
Steps to an Effective Risk Management
1. Determine which type of risk measure (absolute or relative) is appropriate to the mandate
2. Determine how each aspect of the strategy contributes to risk (rewarded factors or allocation to sectors or securities)
3. Determine the overall level of risk targeted
4. Allocate risk appropriately among individual factor or positions.
81
Absolute Risk/Variance
* Need to look at the absolute portfolio variance
* The contribution of asset “i” to the total portfolio variance
* The total portfolio variance is the sum of each asset’s contribution to the portfolio variance
* Portfolio manager generates their return from the exposure to rewarded factors and a low idiosyncratic risk
82
Relative Active Risk/Variance
* When a manger is concerned about performance compared to a benchmark
* The Covariance between the active returns of asset “i” and the active returns of the portfolio reflects the covariances between the active returns of asset “i” and the active return for each of the assets in the portfolio.
* Adding up the contributions to active variance (CAV) for all assets in the portfolio produces the variance of the portfolio active return (AVp)
* Relative risk attribution could be done at a country basis, sector, or factor.
83
Risk Constraints and Approaches
**Heuristic:** “good rules of practice/thumb” limits the positions to a sector or client position
**Formal:** Statistical in nature, limits on volatility, or drawdowns
84
Value at Risk (VaR)
95% VaR would mean that the portfolio is expected to lose no more than 5% of the portfolio in one day, if a drop where to occur
* **Conditional VaR:** expected value in the tails after
* **Incremental VaR:** change in the VaR with a new position in the portfolio
* **Marginal VaR:** Impact the change in a current position.
85
Equity Market Neutral (Long-Short)
The net position is zero meaning that the portfolio has the same amount in a long position as it does in a short position
* Beta = Zero; Carries no systematic risk
* Beta Exposures = Market Exposures
* Measured against the risk-free rate.
86
Long Extension Strategy
Example “120-20” Invest 100% by long 120% short 20% give you a net = 100%
87
Merits of Long Only Investing
1. Influenced by Factors Long-Term Risk Premium
2. Capacity and Scalability: Based on the underlying liquidity of the underlying security.
3. Limit legal liability laws: Long investor max loss is the amount of the security.
4. It is complexity of the transactions, short selling is more complex.
5. Cost involved: Cost are greater for a short position
6. Ideology of the investor
88
Long-Short Strategies
**Benefits:**
1. Greater ability to express their negative ideas
2. Use of leverage by the short position to increase their long positions
3. Ability to remove market risks
4. Greater ability to have control over exposures to risk factors
**Disadvantages:**
1. Short Positions losses are infinite.
2. Need for a high degree of leverage which maximizes gains, but also maximizes losses
3. Costs of a particular security might be very high and not allow a manager to implement a strategy
4. Loss on the short positions will increase collateral demanded from collateral lender.
5. The manager might be vulnerable to a short squeeze
6. The lender can callback their shares at anytime.
89
Short Squeeze
Sudden rise in price in a heavily shorted position causes short sellers to buy back their shares.
90
Skewness
**Measures the degree to which return expectations are non-normally distributed.**
* **Positively skewed:** the mean of the distribution is greater than its median, and the average magnitude of positive deviations is larger than the average magnitude of negative deviations.
* **Negative skewed:** indicates that that the mean of the distribution lies below its median, and the average magnitude of negative deviations is larger than the average magnitude of positive deviations.
91
Asystematic Investment Approach
* Is likely to be designed around extracting premiums from a balanced exposure known rewarded factors
* Typically incorporates researched-based rules across a broad universe of securities.
92
Back-Testing
Purpose is to identify correlations between the current period’s factor scores, FS(t), and the next period’s holding period strategy returns, SR(t+ 1).
93
Packeting
Involves splitting stock positions into multiple parts.
94
Single-Factor Model
* If the factor exposure is neutralized, the active risk will be entirely attributable to the Active Share which will be a consequence of the manager deviating from benchmark weights.
* The active risk attributed to Active Share will be smaller for more diversified portfolios with lower idiosyncratic risk.
* Active risk does rise with an increase in factor and idiosyncratic volatility.
95
Multi-Factor Products
* Are diversified across factors and securities and typically have active share but reasonably low active risk (tracking error) about 3%.
* Have a low concretion among securities in order to achieve a balanced exposure to risk factor and minimize idiosyncratic risks
96
Residual Risk Strategy Constraints
* Long-Only Strategy: The Portfolio manager will be constrained by the weights of the securities in the benchmark if they want to control the residual risk.
* Long-Short Strategy: Eliminates market risk, makes the benchmark useless as a constrained for controlling residual risk
97
Long-Short Spread
* Alphas from the Long Position
* Alphas from the Short Position
* Interest on Proceeds from the Short Sales called a “Short Rebate”
98
Slippage Costs
Price change from the bid-ask spread midpoint at order delivery to the price at order execution
99
Reasons for More Price Inefficiencies on the Short Side
* Hassle to short selling relatively few investors search for overvalued stocks.
* Insiders are less likely to divulge negative information, stock prices might not fully reflect negative information.
* Sell-side analysts predominantly issue “buy” recommendations and may be reluctant to issue “sell” recommendations.
100
What are the Independent Variables for a Returns-Based Style Analysis
* Mututally Exclusive
* Mututally Exhaustive
* Represent distinct sources of risk.
101
High Quality Factors
* Consistent growth in dividends
* High dividend cover / Low-medium dividend pay-out ratio
* High cash flow generation
* High return on equity
CFA Exam Level 3
flashcards
Decks in class (13)
# Cards
