Question
An active manager that charges a 1% annual management fee has a single-factor alpha of 3% annualized. When using a multi-factor model to derive alpha,
An active manager that charges a 1% annual management fee has a single-factor alpha of 3% annualized. When using a multi-factor model to derive alpha, the manager's alpha drops to 0.2% annually. Given these results, would you likely prefer to invest in the active manager or a semi-active factor investing strategy? Please list your reason(s).
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Intermediate accounting
Authors: J. David Spiceland, James Sepe, Mark Nelson
7th edition
978-0077614041, 9780077446475, 77614046, 007744647X, 77647092, 978-0077647094
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