Questions tagged [factor-investing]

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Interplay of statistical factors (PCA) and market factors (value, momentum, low vol, …)

Is there any research done on the interplay between statistical factors (as a result of principle component analysis PCA) and the market factors (especially value, size, low vol, momentum, quality)? ...
3
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0answers
104 views

Regarding the post-facto predictability of stock market returns

Almost all of the research on equity factor investing deals with a priori predictability of the cross-section of stock market returns (i.e., models which use variables and data that would've have been ...
3
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0answers
95 views

Underperformance of low vol factor after US presidential election, comeback of Value

My question is about factor investing. In most equity markets (Europe, US) the factors momentum and low volatility have outperformed the cap weighted indices in the last couple of years while the ...
2
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0answers
82 views

Fama Macbeth and Momentum factor

I am working on a Fama MacBeth regression with excess returns on the LHS and Size, Value an Momentum factors on the RHS. In literature, the Momentum factor is often definded as the cumulative past 6 ...
2
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1answer
719 views

Cash Flows from Operations in Compustat

I'm trying to replicate Piotroski's F-Score (2000) for my PhD. In the paper, one of the components to F-Score is CFO / Assets from Compustat. However, item 308 (...
2
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0answers
166 views

Alpha decay for strong vs weak signals

Assuming you are computing alpha decay similarly to shown here (e.g., exponential decay of the information ratio with lagged signals). I'm wondering whether it is preferable to treat strong vs weak ...
2
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0answers
75 views

explanation of factor tilts that uses mathematical notation

Can anyone provide a definition of "factor tilt" that uses mathematical notation? Perhaps factor tilts are based on factor regression models. Let's say that our returns vector $\mathbf{y}_t$ can be ...
1
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1answer
71 views

Fundamental factor models: what to move to the LHS

My question is simple: what is the best practice in moving known variables to the LHS of Fundamental Factor Model regression? I am seeing different approaches. $R_{it}=\alpha_i + \beta_{i,1} f_{1,t}+ ...
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49 views

Are these factor returns are to low?

I have just found a statistics summary of different MSCI factors (based on the Barra Global Total Market Equity Model for Long-Term Investors (GEMLT)). I wonder why the annual returns are so low ...
1
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0answers
65 views

Relationship between correlations of long only and short only portfolio with long-short portfolio?

I am working on one quality and value factor, the correlation between a long-only or short only portfolio of these two factors is respectively 0.7 and 0.8, and the correlation between combined long-...
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0answers
45 views

Crisis in in-sample period

I am backtesting a value momentum asset allocation strategy and my in sample period is from 2003 to 2011 and out sample from 2012 to 2019. I am optimising a cutoff for value on in sample to allocate ...
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0answers
43 views

How can we track historical valuations of factor portfolios in emerging markets (in terms of P/B or P/E e.g.)?

We can analyze factor investment approaches (momentum, low vol, quality, dividend, ...) for example by looking at the corresponding MSCI indices. Doing so we can read of today's valuations (P/E, ...
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0answers
11 views

Portfolio return attribution by styles

Say I have a time series of portfolio returns (mutual fund xyz), time series for the benchmark, and time series for MSCI style indices (value, momentum, quality, low vol). Note: style indices are long ...
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42 views

Simulation of price ratios

How to go about simulations of variables like price-to-book or dividend yield? Basically I would like to do a simulation based testing of an investing strategy (other than historical simulation). It’s ...
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192 views

Fama-Macbeth Regression: Weird Risk Premia

I just conducted a Fama-Macbeth regression where in the first step I calculated a time-series regression for each individual stock to get three betas (for mkt-rf, smb, hml) for each stock. Then I ran ...
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47 views

What is the earliest mention of ROE as an asset pricing factor?

Can anyone tell me, what is the first application of ROE in an (empirical) asset pricing model? I am aware of the 2011 paper by Chen, Novy-Marx and Zhang. Are there any earlier papers on the matter?