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 considers whether Fama–French risk-adjusted alpha can be estimated for individual stocks in a study of corporate culture and returns. The proposed analysis estimates monthly risk-adjusted returns from rolling regressions, compounds them into…
The document answers whether large banks and institutional investors use dividend discount models for equity valuation. It says DDM is used in professional practice and suggests that analysts may use a two-stage version more often than the single-stage…
The document explains why alpha and beta have different reference values in stock analysis under the Capital Asset Pricing Model. Alpha measures return beyond the amount implied by the model, so the market portfolio, used as the baseline, has zero alpha: it…
The document examines a toy asset-pricing example in which a factor perfectly explains differences in stock returns through different factor loadings, while the factor itself fluctuates around zero. The apparent puzzle is that a cross-sectional regression…
The document explores why portfolio investors distinguish factors that forecast returns from factors used to describe risk exposures. Its central correction is that bearing risk does not guarantee a return premium: some exposures may have a researched…
The document explains why the squared factor-model residuals for an asset are often used as a measure of idiosyncratic risk. From the regression perspective, residuals are the returns left unexplained by the chosen market or factor model. Least squares fits…
High-minus-low analysis compares returns from portfolios formed at opposite ends of a chosen stock characteristic. The spread tests whether the characteristic is associated with differences in average returns over time, with extreme groups making the…
The note derives a link between a security’s price and its future cash flows and returns. For a dividend strip, the log price equals the future log dividend minus the log return. Regressing each future quantity on the current price shows that the price must…
The document asks for free equity screeners that provide valuation measures such as price-to-earnings or enterprise-value-to-EBITDA, growth, and returns on capital, with data that can be exported to spreadsheets. It names Finviz and Yahoo Finance as possible…
The document discusses why a mutual fund’s measured active return may fall as assets under management rise. One explanation is statistical: smaller funds have more variable outcomes, so they are more likely to appear among both unusually strong and unusually…
The document presents questions about comparing principal components extracted from a global excess-return covariance matrix with a set of asset pricing factors using canonical correlation analysis. It reports five canonical correlations, with the leading…
The note considers how to estimate the alpha of a portfolio split across US and German equities using Fama–French factors. It compares estimating separate country-level regressions and averaging their alphas, using global factors, or constructing a combined…
The document asks how to adapt the traditional mean-variance portfolio objective when expected returns and covariance are specified for factors rather than directly for assets. It proposes combining factor returns, asset weights, factor exposures, and the…
The document explains how to recover residual returns when factor loadings and asset returns are known. It treats the factor model as a linear regression: loadings form the design matrix, factor realizations are the regression coefficients, and returns are…
The document asks whether a historical value-strategy test beginning after a severe market decline might omit companies that failed or left an index during the downturn. The proposed study ranks stocks annually by price-to-cash-flow ratio, assigns them to…
The document explains why researchers may analyze a fundamental factor by forming portfolios from equities at the high and low ends of its values, rather than regressing returns directly on raw factor values across the whole universe. These groups can reveal…
The document distinguishes exact and approximate factor models by the structure allowed for residual covariance. In an exact factor model, the residual covariance matrix is diagonal, so residual movements are uncorrelated across assets. In an approximate…
The discussion considers whether two principal components can recover theoretical prices for futures contracts when the components were computed from cumulative log differences. It explains that reconstruction depends on how much of the original variation…
The document addresses how to calculate returns for the six Fama–French portfolios formed by combining size groups with book-to-market groups. It says the published portfolio returns are available from the researchers’ websites and points readers seeking to…
The document defines stock-specific, or idiosyncratic, volatility within a single-factor return model. A stock’s return is represented as a risk-free component, exposure to the market’s excess return through beta, and a residual term. The standard deviation…
This question distinguishes time-series betas, estimated for each stock from historical returns, from cross-sectional factor exposures used to describe a portfolio’s sensitivity to common risks. Sector exposures are straightforward: use membership…
The document asks how to compare sample, single-index, industry-factor, and principal-component factor models using their implied correlation matrices and minimum-variance portfolio weights. It describes plots from an analysis and proposes that a model whose…
The document asks whether ex-ante active risk from asset allocation can be combined with ex-post active risk from security selection to estimate a multi-asset portfolio’s total tracking error. It raises the key issue that simply adding risk measures assumes…
The document examines whether the CAPM implies that residuals from a market-factor return regression have a diagonal covariance matrix. Its central point is that CAPM restricts expected returns through the priced market factor; it does not rule out other,…