▁▁ ▁As set ▁man agers ▁including ▁Black R ock , ▁Leg g ▁Mason , ▁Hend erson ▁R owe , ▁In ves co ▁and ▁Wis dom Tree ▁all ▁operate ▁smart ▁beta ▁funds . ▁To ▁identify ▁which ▁type ▁of ▁smart ▁beta ▁provides ▁the ▁best ▁fit , ▁qualified ▁institution al ▁invest ors ▁need ▁to ▁understand ▁the ▁expected ▁return ▁and ▁risk ▁for ▁each ▁of ▁their ▁active , ▁pass ive , ▁and ▁smart ▁beta ▁alloc ations . ▁ ▁Common ▁factor ▁based ▁smart ▁beta ▁types ▁revol ve ▁around ▁six ▁ideas ▁for ▁optimization ▁( source : ▁F T SE ): ▁▁ ▁Li qu id ity : ▁Am ih ud ▁ratio ▁– ▁median ▁ratio ▁of ▁absolute ▁daily ▁return ▁to ▁daily ▁trad ed ▁value ▁over ▁the ▁previous ▁year ▁▁ ▁M oment um : ▁resid ual ▁Sh ar pe ▁ratio ▁▁ ▁Qu ality : ▁composite ▁of ▁profit ability ▁( return ▁on ▁assets ), ▁efficiency ▁( change ▁in ▁asset ▁turn over ), ▁ear nings ▁quality ▁( acc ru als ) ▁& ▁le verage ▁▁ ▁Size : ▁full ▁market ▁capital ization ▁▁ ▁Value : ▁composite ▁of ▁trailing ▁c ash - flow ▁yield , ▁ear nings ▁yield ▁and ▁country ▁relative ▁sales ▁to ▁price ▁ratio ▁ ▁Vol at ility : ▁standard ▁deviation ▁of ▁ 5 ▁years ▁of ▁week ly ▁( wed / wed ) ▁local ▁total ▁returns ▁ ▁External ▁links ▁▁ ▁M SC I ▁Research ▁Ins ight ▁Found ations ▁of ▁F actor ▁In vest ing ▁ ▁References ▁▁ ▁Category : In vest ment ▁Category : Port folio ▁theories <0x0A> </s> ▁R anch par ▁( , ▁also ▁Roman