Advantages and Challenges of Quantitative Strategies in Active Equity Investing

Consider a hypothetical asset management firm that specializes in active equity investing using quantitative strategies. The firm employs a model-driven approach to identify mispriced stocks in the market. Recently, they implemented a factor-based model which includes characteristics such as value, momentum, and quality, to rank stocks within their investment universe.

In the context of this firm, discuss the advantages and challenges of employing a quantitative strategy in active equity investing. Additionally, explain how factor-based models can be utilized to enhance stock selection and the overall performance of an equity portfolio.