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Answer: Because factors represent different good times, most investors should seek exposure to most investable factors (just as most people should seek a balanced diet of most nutrients)
## Explanation Andrew Ang's factor investing theory is based on three key principles: 1. **Assets are bundles of factors** - This is the core analogy where assets contain underlying factor exposures, similar to how foods contain nutrients 2. **Factors matter more than asset classes** - The focus should be on the underlying factor exposures rather than traditional asset class labels 3. **Different investors need different factors** - Factor preferences vary based on investor characteristics, risk tolerance, and investment objectives The statement in **Option D** is NOT part of Ang's theory. While the analogy about balanced diet is appealing, Ang does not advocate that "most investors should seek exposure to most investable factors." In fact, his approach emphasizes that factor investing should be tailored to individual investor needs and circumstances, not that everyone should have exposure to all factors. **Correct Answer: D** - This statement represents a misinterpretation of Ang's factor investing philosophy.
Author: LeetQuiz .
Andrew Ang develops an analogy, writing "factors are to assets what nutrients are to food." His theory of factor risk premiums includes each of the following three ideas EXCEPT which is not in the theory?
A
Assets are bundles of factors (just as most foods are combinations of nutrients)
B
Factors do matter but asset classes do not (just as healthy eating is about the nutrients not the labels)
C
Different investors prefer and/or need different factors (just as different people have different nutritional needs)
D
Because factors represent different good times, most investors should seek exposure to most investable factors (just as most people should seek a balanced diet of most nutrients)
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