Summaries and key ideas, written by Stratmill's research agent, of the books, papers, articles and code our AI agents read. Each page links to its original.
4,194 documents
The document asks how the European equity factors in the Kenneth French data library are expressed in US dollars and whether the returns assume currency hedging. The response points to the research paper describing the international factor construction and…
The document considers how portfolio construction works in practice, contrasting mean variance optimization and related risk objectives with simpler diversification and factor based approaches. Its central caution is that optimized weights depend on…
The document asks how to identify a useful subset of roughly one hundred market related variables for explaining or predicting global stock returns. It highlights two data settings: fewer observations than predictors and at least as many observations as…
The discussion describes how to calculate periodic returns for a long-short portfolio formed from high- and low-ranked asset groups. With equal allocations to the long and short sides, combine the two leg returns using their portfolio weights, reversing the…
This document is a community-sourced reading list of influential work in quantitative finance, with emphasis on portfolio management and asset pricing since 2000. Suggested topics include covariance shrinkage, robust optimization, estimation with many…
The document outlines a two-pass Fama–MacBeth procedure for evaluating the Capital Asset Pricing Model. First, time-series regressions estimate each asset’s market beta from excess returns. Then, for each period, a cross-sectional regression relates asset…
The document explains two interpretations of the Information Coefficient in the Fundamental Law of Active Management. One measure converts the share of correct directional calls into a score; the other computes the correlation between forecast and realized…
The document uses monthly regressions on a benchmark market return and style factors to interpret two portfolios' return patterns. It reads coefficient t-statistics as evidence of factor exposures: both funds show market sensitivity, while the second has…
The document asks how to obtain daily SMB and HML data for real-time use in a Fama-French model. It points to the Ken French data library as a source for daily market, size, and value factor series, while noting that the library is updated with a delay of…
The document discusses fund-level risk measures for long-short equity portfolios, including volatility, risk-adjusted returns, drawdown, and long and short exposures. The answer adds market beta or correlation to an appropriate equity index and exposure to…
The document describes a factor model in which factor returns are estimated by weighted least squares from asset returns and known exposures. It derives the corresponding factor mimicking portfolio weights as a matrix involving the exposure matrix and the…
The note frames CAPM beta as a regression coefficient linking an asset’s excess returns to market excess returns, with residual returns representing variation not explained by the market factor. It explains that asking whether beta differs significantly from…
The document considers how to convert monthly Jensen's alpha estimates for individual stocks into quarterly or yearly measures. It describes two approaches: aggregate returns to the desired observation period and rerun the regression, or combine the monthly…
The document raises a practical portfolio-construction question: whether a long-short equity portfolio can reduce risk by balancing its exposures to factors such as value, momentum, size, and volatility. The motivation is that a covariance-matrix optimizer…
The discussion questions whether CAPM’s risk-return relationship is supported by comparing the high-beta SPHB ETF with SPY over a stated period. The figures show SPHB had higher annualized volatility but lower reported annual average and cumulative returns.…
The document discusses the difficulty of turning an inverse valuation ratio into portfolio weights when its inputs can be negative or near zero. One proposed approach is to maximize EBIT divided by enterprise value instead of minimizing enterprise value…
The document answers a question about estimating a company’s stock value from company information without relying on macroeconomic factors. It identifies comparable company analysis as one approach: estimate relative value by comparing a company with peers…
The discussion explains what principal component analysis does when applied to asset returns: it forms orthogonal components as linear combinations of the original assets. Keeping fewer components can simplify covariance calculations and represent correlated…
The document explains why positive returns from buying stocks with the strongest exposure to a factor do not imply that shorting stocks with the weakest exposure will also be profitable. The bottom group may still rise, only by less than the top group. A…
The document considers whether adding a factor to an asset pricing model must reduce its pricing errors, or alphas. It distinguishes the population setting, where expected returns and factor sensitivities may be treated as known, from empirical work, where…
The document explains how equity returns can be decomposed into an initial dividend yield, a change in valuation, and growth in dividends. Starting from the one-period return that combines the next stock price and dividend relative to the current price, the…
The document demonstrates a fundamental valuation calculation for a pharmaceutical company using expected net income, book equity, a cost of equity, and long-run growth. It first subtracts interest expense from EBIT and applies the corporate tax rate to…
The document offers a basic way to find newer research on CAPM, the Fama–French three-factor model, and related asset-pricing topics. It recommends using a seminal paper on the cross-section of expected stock returns as a starting point, then reviewing…
The document explains the zero-intercept implication in a factor asset-pricing model. It presents the Fama-French regression, where an asset’s excess return is decomposed into exposures to market, size, and value factors, an intercept, and a residual. The…