How do people isolate fundamental risk factors or trade catalysts? Using technical metrics seems more straightforward (i.e. if above 200dma stay in, if below, sell - that's your risk factor) - I'm not saying whether those metrics are valid or not. It seems the whole investment management industry is driven by fundamental ratios and earnings, but how do you isolate and trade off of P/B, P/E, or any other fundamental ratio/metric? It seems capital structure arb, L/S equity, and merger arb are steps in the right direction, though, again, it's not purely isolating the factor you think makes the trade profitable. For example, if I think a firm has a very low P/B ratio and I want to buy the company with the expectation the P/B will increase over time - can I isolate my risk to that factor or am I forced to also take other ratios and external factors into account? Perhaps this is silly, it just seems so prevalent to hear people talk about how a stock is trading at a low multiple and expect that to change - yet you rarely see any work to show what effect that multiple actually has on price. I guess this is the basis for APT, PCA, and factor models?