What is the primary characteristic of smart-beta funds?

"Smart" algorithms that predict market movements They exclusively focus on high-growth technology stocks They deviate from traditional market-cap weighting methodologies They are actively managed by experienced portfolio managers

Which of the following is NOT a commonly recognized factor in factor investing?

Value Momentum Liquidity Quality

What is the main reason why value stocks are often priced lower than their growth counterparts?

They are less popular among investors They carry a higher risk of bankruptcy They have lower marketing budgets They are primarily traded on smaller exchanges

What is a potential drawback of relying solely on backtested data when evaluating factor investing?

Backtests can be easily manipulated Past performance is not indicative of future results Backtests often exclude trading costs and fees Backtests are typically conducted over short timeframes

What is the author's stance on allocating 100% of an equity portfolio to smart-beta funds?

It is a highly recommended strategy It is a viable option for short-term investments It is not advisable It is suitable only for experienced investors

What is a key consideration for investors looking to mitigate the cyclical nature of factor performance?

Timing the market based on economic indicators Investing in a diverse range of factors Focusing on factors with consistent historical outperformance Selecting funds with the lowest expense ratios