Betas, Benchmarks and Beating the Market
We give an explicit formulaic algorithm and source code for building long-only benchmark portfolios and then using these benchmarks in long-only market outperformance strategies. The benchmarks (or the corresponding betas) do not involve any principal components, nor do they require iterations. Instead, we use a multifactor risk model (which utilizes multilevel industry classification or clustering) specifically tailored to long-only benchmark portfolios to compute their weights, which are explicitly positive in our construction.
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Zura Kakushadze (add twitter)
Willie Yu (add twitter)
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07/26/18 05:53PM
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