statement1

问题如下：

Monteo and Chaterji also discuss other approaches to asset allocation. Chaterji tells Monteo that he understands the factor-based approach to asset allocation to have two key characteristics:

Ÿ Characteristic 1 The factors commonly used in the factor-based approach generally have low correlations with the market and with each other.

Ÿ Characteristic 2 The factors commonly used in the factor-based approach are typically different from the fundamental or structural factors used in multi-factor models.

Monteo concludes the meeting with Chaterji after sharing his views on the factor based approach.

Which of the characteristics put forth by Chaterji to describe the factor-based approach is/are correct?

选项：

A.

Only Characteristic 1

B.

Only Characteristic 2

C.

Both Characteristic 1 and Characteristic 2

解释：

A is correct. The factors commonly used in the factor-based approach generally have low correlations with the market and with each other. This results from the fact that the factors typically represent what is referred to as a zero (dollar) investment or self-financing investment, in which the under-performing attribute is sold short to finance an offsetting long position in the better-performing attribute. Constructing factors in this manner removes most market exposure from the factors (because of the offsetting short and long positions); as a result, the factors generally have low correlations with the market and with one another. Also, the factors commonly used in the factor-based approach are typically similar to the fundamental or structural factors used in multifactor models.