Related papers: Performance vs Persistence : Assess the alpha to i…
The Fama-French three factor models are commonly used in the description of asset returns in finance. Statistically speaking, the Fama-French three factor models imply that the return of an asset can be accounted for directly by the…
This paper investigates the time-varying structure of Fama and French's (1993; 2015) multi-factor models using Fama and MacBeth's (1973) two-step estimation based on the rolling window method. In particular, we employ the generalized GRS…
We hypothesize that portfolio sorts based on the V/P ratio generate excess returns and consist of companies that are undervalued for prolonged periods. Results, for the US market show that high V/P portfolios outperform low V/P portfolios…
The Fama-French model is widely used in assessing the portfolio's performance compared to market returns. In Fama-French models, all factors are time-series data. The cross-sectional data are slightly different from the time series data. A…
Alpha factor mining aims to discover investment signals from the historical financial market data, which can be used to predict asset returns and gain excess profits. Powerful deep learning methods for alpha factor mining lack…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
In light of the power problems of statistical tests and undisciplined use of alpha-based statistics to compare models, this paper proposes a unified set of distance-based performance metrics, derived as the square root of the sum of squared…
Estimating the covariance of asset returns, i.e., the risk model, is a key component of financial portfolio construction and evaluation. Most risk modeling approaches produce a factor model that decomposes the asset variability into two…
We analyze actively managed mutual funds in China from 2005 to 2017. We develop performance measures for asset allocation and selection. We find that stock selection ability from holding-based model is positively correlated with selection…
We find that the CAPM fails to explain the small firm effect even if its non-parametric form is used which allows time-varying risk and non-linearity in the pricing function. Furthermore, the linearity of the CAPM can be rejected, thus the…
The multi-factor model is a widely used model in quantitative investment. The success of a multi-factor model is largely determined by the effectiveness of the alpha factors used in the model. This paper proposes a new evolutionary…
The risk premia of traded factors are the sum of factor means and a parameter vector we denote by {\phi} which is identified from the cross section regression of alpha of individual securities on the vector of factor loadings. If phi is…
In the standard equilibrium and/or arbitrage pricing framework, the value of any asset is uniquely specified from the belief that only the systematic risks need to be remunerated by the market. Here, we show that, even for arbitrary large…
We discuss the foundations of factor or regression models in the light of the self-consistency condition that the market portfolio (and more generally the risk factors) is (are) constituted of the assets whose returns it is (they are)…
We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…
The paper provides a new explanation of the low-volatility anomaly. We use the Adaptive Multi-Factor (AMF) model estimated by the Groupwise Interpretable Basis Selection (GIBS) algorithm to find those basis assets significantly related to…
In the seminal work [9], several macroscopic market observables have been introduced, in an attempt to find characteristics capturing the diversity of a financial market. Despite the crucial importance of such observables for investment…
We propose a novel approach to infer investors' risk preferences from their portfolio choices, and then use the implied risk preferences to measure the efficiency of investment portfolios. We analyze a dataset spanning a period of six…
This paper proposes a simulation-based framework for assessing and improving the performance of a pension fund management scheme. This framework is modular and allows the definition of customized performance metrics that are used to assess…
There is a great number of factors to take into account when building and managing an investment portfolio. It is widely believed that a proper set-up of the portfolio combined with a good, robust management strategy is the key to…