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(a) Outline the key strategies (e

Finance

(a) Outline the key strategies (e.g., size, value, momentum, etc.) used in modern factor investing with which you are familiar from the course or otherwise, illustrating their construction, rationale, performance over time, and how they can be used in both passive and active portfolio management.

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There are different type of strategies which can be used in factor investing and they are as follows-

A. Momentum investing- it is a reflection of buying stocks which are capitalising upon the continuance of a market Trend and it will be always involving going long on the stocks markets which are showing uptrend and sorting all such stocks which are showing downtrend so they will be always trying to outperform the market based upon the selection of the stocks which are providing you with better momentum.

Momentum investing can be used in active investment by selection of those stocks which are in momentum by going long or short accordingly where as it can also be used in the passive investment as it can be passively used for investing into long term.

B. Size investing- side investing is always focused upon positional sizing and it will be trying to reflect the number of unit invest in a particular security by interested and it will reflect the account size and risk tolerance so it will be trying to determine how many security is the investor will be purchasing and it will be most closely associated with faster moving in the stars like day trader and currency trader.

Size investing will be helpful in active investment as it will be trying to provide higher quantity into those stocks which are providing with higher return whereas those stocks which are better for long term investment will be provided with higher position in passive investment.

C. Value investing is the type of investment strategy in which the investment will be made into also the stocks which are undervalued in respect to the current market price and it will mean that the intrinsic value of these companies are currently higher than their market value so they will be trying to invest into such companies and capitalise on the gains.

it will also try to sell stocks which are overvalued and trading beyond their intrinsic valuation and they can be used for active investment as they will be trying to provide with investment into these companies for the the active management for the shorter time in order to play upon the price discrepancy and investment into the long term in order to have a better protection and risk tolerance.