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 to construct industry portfolios for markets such as the UK and Japan when a familiar US industry classification may not be available or current. The intended use is to study relationships between stock returns and economic variables at…
The document asks whether a near-zero intercept is plausible when regressing monthly excess returns for a dataset of stocks on the market, size, and value factors. The reported example has positive market and size loadings, a small negative value loading,…
The document explains why earnings per share can matter even though companies have different share counts. EPS expresses earnings on a per-share basis, which allows it to be related to share price and valuation multiples such as price-to-earnings. Analysts…
The document asks what empirical research supports value measures other than price-to-book. It mentions sales-to-enterprise-value, cash-flow-to-enterprise-value, earnings-to-price, and forecast earnings-to-price as examples used by AQR, then points to a…
The note explains a possible reason Fama and French begin their stock return analysis in 1963: earlier COMPUSTAT records may be affected by substantial selection bias. The pre-1962 sample reportedly overrepresents large companies that had already been…
The document asks how to compare growth across products with different starting sales levels. It considers whether an indicator can assign the same value to products that double their sales, even if their absolute increases differ. One response proposes…
The note examines an apparent contradiction in using the CAPM to infer how stock returns respond to a change in the risk-free rate. Setting a broad market’s beta to one seems to imply that its expected return does not change when the risk-free rate moves,…
The document considers whether to augment the Fama–French–Carhart equity regression with Quality Minus Junk and Betting Against Beta. The responses emphasize that factor selection depends on the dataset and on whether the added variables provide distinct…
The document asks why portfolios sorted by lagged maximum return show a significant spread between extreme groups while the Fama–MacBeth regression coefficient on that variable is not significant. The response notes that these results concern different…
The document considers adding idiosyncratic risk to a CAPM-style asset-pricing test using the Fama–MacBeth procedure. The proposed setup estimates each asset’s market beta in time-series regressions, then uses estimated characteristics in period-by-period…
The discussion clarifies the roles of variables in a factor return model. The question contrasts a familiar regression, where observed factor data are multiplied by estimated coefficients, with a formulation involving benchmark returns, pure factor portfolio…
The document surveys ways to obtain industry labels for stocks, noting that classification systems differ and are often maintained by index providers. It identifies GICS and ICB as proprietary schemes and cautions that a researcher should first decide how…
The document derives a framework for breaking total shareholder return into changes in valuation multiples, sales, operating margins, shares outstanding, and dividend yield. It starts with price appreciation plus dividends, then rewrites the price ratio…
The discussion frames beta as a measure whose usefulness depends on the portfolio, benchmark, and intended use. Multi-factor models often explain returns better than CAPM, and the market factor can account for relatively little volatility, but beta can still…
The discussion explains why a time-varying measure of S&P 500 mispricing cannot be defined independently of a model for what prices or expected returns should be. Market efficiency tests are joint tests of efficiency and an asset pricing model, so labeling…
The document examines whether factor portfolios built from recently updated financial statements outperform portfolios using older information. Using factor return data from Professor French’s database, the author compares returns during the first six months…
The document explains how to combine monthly Fama–French factor returns into multi-month returns. Rather than taking an arithmetic average, the response compounds the monthly returns: convert each percentage return to a growth factor, multiply those factors…
The document questions whether a stock’s beta is a dependable long-term measure of risk and a sound basis for company valuation through the CAPM. It recounts a shift in empirical evidence: stocks with higher betas once appeared to earn higher average…
The document explains how to test whether a set of asset-pricing factors earns risk premia, rather than merely checking whether individual securities have statistically significant factor betas. It recommends the Fama–MacBeth procedure for a study of UK…
The document distinguishes the CAPM’s expected-return prediction from statistical estimation of beta using realized returns. Regressing excess security returns on excess market returns through the origin imposes a zero alpha and produces a slope based on…
This document explains a two-part decomposition of stock price changes into cash flow news and discount rate news. A price function depends on both expected cash flows and an implied cost of capital; the decomposition attributes changes to each input by…
The document raises a factor-investing question about the divergence in equity factor performance around the final quarter of 2016. It reports that low volatility had recently outperformed broad capitalization-weighted indices before weakening after the US…
The document describes a portfolio-construction task using monthly average quoted spreads for a broad set of companies over a long sample. The intended procedure is to rank stocks by a liquidity measure at the start of each year, divide them into ten equally…
The document compares two approaches to empirical stock return prediction: estimating a panel regression with stock-level characteristics and sorting stocks into portfolios. Portfolio sorts are popular because their results are easy to explain and can be…