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Does selecting stocks based on more than one characteristic improve your ability to devise portfolios with...

Does selecting stocks based on more than one characteristic improve your ability to devise portfolios with abnormal returns?

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Answer #1

A portfolio manager always chooses a stock with mpre than one characteristics just to be on safe side. Choosing stock out of only characteristics may be risky for a portfolio manager. This manager in turn choose stocks with more than one characteristic and lays them on excel. After that the manager runs regression analysis and stress testing to see how the stocks perform in different situations.

So a stock with different characteristics even given positive return in bad economic conditions. So it can surely help the manager in generating abnormal return.

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