How Factor Dashboard Long–Short Win Rates May Be Calculated
Summary
This forum post asks how a factor dashboard calculates win rates for low and high factor quantiles and for a long–short portfolio. It contrasts two possible interpretations: counting individual stocks with positive returns, or counting rebalancing periods in which the aggregated portfolio return is positive. It also asks how stocks on the two sides are combined and whether they must be paired.
The post supplies an illustrative example of a reported low-quantile win rate and raises questions about portfolio weights, but it does not provide an answer or establish the dashboard’s actual methodology. Readers should treat the figure as ambiguous without definitions of the return unit, aggregation, weighting, rebalance schedule, and treatment of the long and short legs. Its value is chiefly as a reminder to verify metric construction before comparing factor results.
Key ideas
- A win rate can count positive individual stock returns or positive portfolio returns across rebalancing periods.
- Long–short performance may be aggregated across the two quantile portfolios without matching individual stocks.
- Portfolio weighting and the definition of each win must be known to interpret a reported win rate.
- The post raises methodological questions but does not answer them.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.