Sensitivities of Multi-factor Stock Portfolio Performance
December 9, 2022 - Big Ideas
Why do portfolios formed from the principal components of many long-short stock return factors from two recent studies, one covering 207 factors and the other 153 factors (with overlap 97), have such different out-of-sample gross Sharpe ratios? In their November 2022 paper entitled “Factor Returns and Out-of-Sample Alphas: Factor Construction Matters”, Hendrik Bessembinder, Aaron Burt… Keep Reading