You are an active British stock portfolio manager. Your performance is measured against the FTSE index, a broadly based British stock index. It has been repeatedly observed that small-capitalization stocks outperform large-capitalization stocks over prolonged periods of time ("small-firm effect")
but that there have been periods when the reverse was correct. It has also been repeatedly observed that value stocks (firms with low price-to-book ratios) outperform growth stocks over prolonged periods of time ("value/growth effect") but that there have been periods when the reverse was correct.
How would an attribute factor model be useful in estimating the risks that your performance deviates from that of the assigned benchmark?

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The Answer of You are an active British stock portfolio manager. Your performance is measured against the FTSE index, a broadly based British stock index. It has been repeatedly observed that small-capitalization stocks outperform large-capitalization stocks over prolonged periods of time ("small-firm effect")
but that there have been periods when the reverse was correct. It has also been repeatedly observed that value stocks (firms with low price-to-book ratios) outperform growth stocks over prolonged periods of time ("value/growth effect") but that there have been periods when the reverse was correct.
How would an attribute factor model be useful in estimating the risks that your performance deviates from that of the assigned benchmark?

You Are an Active British Stock Portfolio Manager