This is a summary of links featured on Quantocracy on Friday, 01/05/2018. To see our most recent links, visit the Quant Mashup. Read on readers!
-
Beyond Excess Returns: How to Enhance Sentiment Strategies using MSCI Barra Risk Models [Raven Pack]We have just published a white paper showcasing the benefits of hedging a sentiment signal using risk factors from several MSCI Barra Risk Models. In this post, I provide some details on the methodology used for the strategy and on the achieved results. Excess returns: Ignores several risk factors For simplicity, researchers often use excess returns when evaluating the efficacy of a trading
-
Predicting Stock Returns Using Firm Characteristics [Alpha Architect]A few weeks ago, we did a deep dive into the factors versus characteristics debate. One of the reasons weve brought up this debate is due to the fact that factor loadings (from regressions) are arguably not as helpful as portfolio characteristics. In other words, knowing a portfolio P/E ratio is more informative for forecasting expected returns than knowing the HML factor loading is .6.