Ultimately, the equity
investor will haul in a larger alpha catch
by emulating the skilled fisherman: first, identifying a promising location (i.e., small cap stocks), then using multiple lines and hooks (i.e., implementing
value, momentum, and quality strategies to
exploit the chum of risk and mispricing in each), and lastly, dangling the lure of skilled active management to tease out the smallest trading costs possible.
Value strategies «
exploit the suboptimal behavior of the typical
investor»
by behaving in a contrarian manner: selling stocks with high past growth as well as high expected future growth and buying stocks with low past growth and as well as low expected future growth.