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 compares two ways of describing beta: as a relationship between an asset’s and market’s returns, and as the ratio of expected excess returns implied by CAPM. It connects them through a return model in which the asset return depends on the…
The document explains how to interpret the three maturity-dependent loadings in the Nelson–Siegel model of the yield curve. Its factors represent level, slope, and curvature: the constant loading applies across maturities, while the other two functions shape…
The discussion considers how to reduce correlation among factor-mimicking portfolios built from Fama–French style sorts. Because the traditional sorting procedures do not explicitly control correlations, one proposed approach is to construct replacement…
The note describes how to test whether multiple factors can be omitted from a multifactor asset-pricing model. Its example asks whether the size and value factors in the Fama-French three-factor model can be excluded while retaining the market factor. For…
The document surveys research using information from option prices and implied volatility to forecast returns. It groups examples into several themes: predictors derived from implied volatility, expected-return estimates recovered from option prices, and…
The document explains a forecast transformation from portfolio research: center a vector of raw forecasts by subtracting its mean, then multiply by the inverse transpose of a matrix factorizing the forecasts' covariance. If the covariance matrix is written…
The note describes evaluating a portfolio against the Fama–French three-factor model by regressing portfolio excess returns on the factor returns. It proposes removing the factor contributions from the portfolio return series and asks whether the resulting…
The question outlines a procedure for constructing the size and value portfolios used to form the Fama–French three-factor model from monthly stock data. At each period, stocks are split into small and big groups using market capitalization, then each size…
The document explains how to set up a time-series factor regression for a portfolio return series. First, subtract the period’s risk-free rate from the portfolio return to form its excess return. Then regress that series on the market excess return, SMB, and…
The document explains why a test for market inefficiency cannot cleanly distinguish a genuine return anomaly from a flaw in the model used to define expected or risk-adjusted returns. This is the joint hypothesis problem: testing whether prices are efficient…
The document considers estimating the chance that a stock reaches a future price by examining returns over a matching calendar period in each of several prior years. It proposes using those returns to normalize past price moves to today’s price, then…
This document asks how much future company information, especially accounting results and profits, could explain subsequent stock returns if it were known in advance. It contrasts that hypothetical question with conventional factor research, which uses…
The document explores whether behavioral preferences could shape asset pricing models and help explain differences in expected returns beyond conventional risk factors. It asks whether ideas from Prospect Theory, including loss aversion and sensitivity to…
The document discusses possible reasons systematic factor strategies underperformed across regions and sectors in 2016. The response proposes several market conditions that could have hurt returns. Sharp sell-offs followed by strong rebounds can challenge…
This collection of practitioner observations links asset returns to discount-rate and cash-flow shocks, aggregate risk, and changing economic regimes. It argues that risk depends on how returns covary with investors’ circumstances, and that regime shifts can…
The discussion presents several quantitative ideas for changing portfolio exposures across assets or building active portfolios. Momentum-based timing is introduced as a way to switch between major asset classes. Other suggestions include combining valuation…
This discussion considers how to use principal components from a cross-asset ETF portfolio to describe future market moves and assess whether factor weightings remain stable. One response warns that transposing a data matrix with many time observations…
The document clarifies how to use lagged firm characteristics, such as profitability and accruals, in a rolling return-prediction setup. Its answer says to estimate slopes by regressing past returns on those characteristics over a rolling historical window,…
The document explains CRSP’s value-weighted return series as returns on a market portfolio proxy. In a value-weighted portfolio, securities contribute according to their market values, so a defined set of traded stocks can be combined into an aggregate…
The exchange offers a starting point for learning how factor strategies are discussed in commodities. It recommends a commodity benchmarking article and suggests studying value and momentum, with a cross-asset factor paper as a reference. It also names carry…
The document explains how researchers estimate stock sensitivities to market or other factors using daily returns. A rolling annual estimation window means each regression uses a recent year of daily observations; it does not mean calculating a separate beta…
The document compares data-driven prediction with theory-based mathematical modeling and presents a broader three-part taxonomy: statistical, equilibrium-based, and empirical approaches. Statistical methods seek predictive accuracy with limited prior…
The document compares introductory and advanced textbooks for learning asset pricing, grouping recommendations by their emphasis and mathematical level. Cochrane is presented as an accessible bridge between theory and empirical testing, organized around…
The post answers how to obtain size and value factors for European equity markets when the commonly used Fama–French library is associated with U.S. data. It points readers to pooled European factors from Kenneth French’s data library and describes several…