Replacing linear factors with a non-linear, characteristic approach in quant equity
Flirting with Models
English - January 09, 2023 09:00 - 21 minutes - 38.6 MB - ★★★★★ - 215 ratingsInvesting Business News Business News investing Homepage Download Apple Podcasts Google Podcasts Overcast Castro Pocket Casts RSS feed
We’re back with another clip from the archives. This time it’s Season 4 Episode 9 with Vivek Viswanathan.
For three decades, equity quants have largely lived under the authoritative rule of the Fama-French 3 Factor Model and linear sorts. In this episode, Vivek provides an cogent alternative to the orthodoxy. Specifically, he explains why an unconstrained, characteristic-driven portfolio can more efficiently capture behavioral-based market anomalies. I think this is a master class for alternative thinking in quant equity.
It was really tough to clip this episode. Vivek’s comments about Chinese markets provide a tremendous example about finding alpha in alternative markets. But I’ll leave that for you to go back and dig out!
Okay, let’s dive in.