Factor investing
Factor investing, an investment strategy that helps create a portfolio by selecting securities based on factors. Factors help in explaining the returns and risk of these securities. Macroeconomic and style are the two types of factors. The macroeconomic factors such as interest rates, inflation, liquidity can help to explain returns across asset classes. On the other hand, the style factors such as value, size, momentum, low volatility, quality can help to explain returns within asset classes. Using different factors, investors can generate higher returns, reduce risks and increase the diversification of the portfolio.
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