Abstract

Once upon a time the word factor was restricted to a few esoteric quantitative fields that investors had never heard of. The word was defined in each field. Consequently, the people who worked in these fields knew what it meant. Thus, the word was useful. One result of competitively marketing quantitative techniques to investors is that technical literacy has declined. In particular, the word factor is now so ambiguous that it is almost meaningless. This paper suggests a definition that will re-establish a useful meaning for the word factor in the investment field. The definition is illustrated with an example.

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