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 examines whether CAPM and the Fama–French three-factor model should be viewed as cross-sectional models, time-series models, or tools for forecasting an individual asset’s future return. It distinguishes CAPM’s theoretical relation among…
The document surveys research directions and references for building systematic strategies in rates markets. It groups the ideas into alternative risk premia, relative value, and directional approaches. Factor strategies can apply trend, value, or carry…
The document explains how to estimate a stock’s sensitivity to a proposed risk factor, such as interest rates, while also including the market factor. It frames each beta as a regression coefficient: stock returns are the dependent variable, and market and…
The document explains the equity term structure as the relationship between cash-flow maturity and expected return, analogous to a bond yield curve. One approach estimates each stock’s duration as the discounted, price-weighted timing of its expected future…
The document introduces the Fama–French three-factor return model, in which market exposure is supplemented by size and value factors. It asks whether the significance and persistence of the size and value premiums show that small-cap and value stocks carry…
The discussion explains why the Fama–French size and value factors are not readily available as current daily observations from the standard French data library: their underlying CRSP inputs are updated monthly. For a daily estimate, the answer proposes…
This question examines whether daily returns for replicated Fama–French five-factor portfolios should begin on the portfolio formation date or after a one-day delay. The author describes applying a one-day lag to portfolios formed at June-end, which treats…
The document asks how to assess the statistical significance of a monthly rebalanced long–short value strategy over a long historical lookback. The answer recommends comparing several performance measures, including Sharpe and Sortino ratios, yearly profits,…
The document examines why a fund regression using principal components of correlated market and style indexes can produce a small beta for the broad market index after the component betas are mapped back to the original variables. The response explains that…
The document compares two ways to estimate performance relative to factors. In a two-stage approach, asset exposures are first estimated from time-series regressions, then factor risk premiums are estimated from cross-sectional regressions at each date and…
The document addresses the challenge of comparing Tobin’s Q across countries when direct data are unavailable. It notes that data needed to calculate the ratio are often missing, particularly for emerging markets, making broad country rankings difficult to…
The discussion answers a dissertation researcher seeking published work that uses the Kenneth French data library’s Fama-French three-factor data, so the researcher can cite precedent rather than calculate factors independently. The response notes that Fama…
The note describes a factor-investing approach that begins with a diversified, market-cap-weighted index portfolio. Practitioners can adjust stock weights according to their estimated exposures to the Fama–French size and value factors, increasing weights in…
The document discusses how to evaluate stock-return factor models and whether information criteria should be applied to time-series regressions for individual assets or to cross-sectional models. It explains that the answer depends on the model’s purpose and…
The document explains how to recover factor returns from observed individual stock returns and a Barra factor exposure matrix. The suggested approach is a cross-sectional linear regression: stock returns are modeled as factor exposures multiplied by factor…
The document addresses how to test whether one factor can be removed from a multi-factor asset pricing model. A factor’s average return alone is not a sufficient criterion: omitting it changes the estimated exposures to the remaining factors. The proposed…
The document distinguishes Jensen’s alpha as the intercept in a regression of a fund’s excess returns on the market’s excess returns from a single-period difference between an observed return and its CAPM expected return. The regression estimates alpha and…
The document describes a practical problem in combining analysts’ ordinal ratings with quantitative stock factors. The ratings run from very good to very bad, but the watchlist excludes the worst stocks, so the observed scores cluster near the favorable end.…
The document asks how to obtain residuals adjusted for heteroscedasticity and autocorrelation when testing whether the alphas in a factor model are jointly zero. Its answer explains that the Newey–West estimator in the R sandwich package returns a…
The document raises a portfolio-construction question about how correlations among long-only and short-only factor portfolios relate to the correlation of their combined long-short portfolio. The example concerns quality and value portfolios: the long-only…
The exchange concerns a derivation connecting a stochastic discount factor (SDF) to a one-factor expected-return relation. The setup defines the SDF as one minus a traded tangency-portfolio return, then asks how the no-arbitrage pricing equation yields the…
The document explains why factor investing and machine-learning applications are more common in equities than in fixed income. Bonds differ by maturity, liquidity, optionality, and capital-structure position, so securities from one issuer are less…
The document concerns construction of the unanticipated risk premium factor used in a stock-return study. It describes URP as the return difference between a low-grade bond index and a portfolio of long-term government bonds, then asks which return measure…
The document raises a question about interpreting variation in price-dividend ratios. It cites a claim attributed to Cochrane and Fama: variation in these ratios is associated with changes in expected excess returns, or risk premiums, rather than news about…