Which of the following strategies involves purchasing equities of small-cap firms and simultaneously selling equities of large-cap firms? A. SMB. B. SUE. C. HML. D. UMD.
SMB (“small minus big”) strategy involves purchasing small firms’ stock and also selling large-cap stocks. HML is “high minus low”—buying value stocks and shorting growth stocks. UMD (“up minus down”) is investing in recent winners and shorting recent losers.
