Evaluating Quantitative Strategies in Active Equity Investing

You are the portfolio manager of an active equity strategy that utilizes quantitative methods to identify mispriced securities. Your firm’s investment philosophy focuses on exploiting market inefficiencies through advanced statistical techniques and modeling. Recently, you have been analyzing a complex stock-selection model that incorporates multiple factors including momentum, value, and earnings surprises.

Your research team has developed a new screening process to identify stocks with high potential for outperformance, relying on historical data and machine learning algorithms. However, some stakeholders are concerned about the model's reliance on backtesting and the risks of overfitting. Additionally, the team faces challenges in integrating qualitative factors with quantitative scores to ensure a comprehensive analysis of stocks.

Discuss the key advantages and limitations of employing a quantitative approach in equity investing. In your response, specifically evaluate the risks of overfitting, the importance of validating the model in varying market conditions, and how to effectively combine quantitative and qualitative analysis in stock selection. Support your arguments with examples from current market practices.