wake2000

doesnt a factor based model include things like fundamentals and economic variables? You can take a position in an equity that tracks somewhat closely to a countrys gdp, but it won't be exact, similarly any fundamentals. So your model might give you a benchmark that is equal to 0.7*uk gdp growth + 0.5*ftse 100 retn + 0.1* uk employment growth, this might give you a benchmark return of 5% in a month, but you wouldn't be able to replicate this benchmark very easily, and any rep would have a massive tracking error as you cant invest directly at employment or gdp returns