Liquid Factor Models

I discuss factor models and propose using liquid instruments which are transparent, tradeable, and cheap to trade. I suggest instrument combinations to create intuitive, less correlated factors; and, I introduce an estimation method to handle multicollinearity and produce more stable estimates. Finally, I show that a liquid factor model explains most of the returns for investment funds with diverse holdings and objectives; that this explanatory power is comparable to or better than other factor models; and, that this reduces unnecessary re-hedging (and thus costs). Liquid factor models let us better estimate fund alphas and cheaply eliminate or enhance exposures.

This is a hybrid event. To attend online, join us on Zoom here at 6pm:
https://numfocus-org.zoom.us/j/85792504458?pwd=QcVTpykFulnsfMG9rbcTiqUSLfqQzu.1

Sponsor: Tegus by AlphaSense will provide the meeting site, as well as pizza and soft drinks for the onsite participants.

• Tegus by AlphaSense's Chicago Address: 200 N. LaSalle Street. Suite 1100. Chicago, IL 60601
• Tegus by AlphaSense's Overview: Tegus by AlphaSense is the leading market intelligence platform for key decision makers. We power some of the world’s most well-respected institutional investors, corporations, and consultancies through the largest and most comprehensive database of primary and market information. Our products and services enable clients to discover unmatched insights and answers to the most challenging questions they face to help them make better informed decisions. We are an end-to-end investment intelligence and research platform that modernizes the research processes. With an ecosystem that combines at-cost, on-demand expert calls with a 55K+ transcript library; quantitative financial workflows that streamline research across company disclosures, management presentations, earnings calls and filings; and 4K+ fully-drivable financial models and company benchmarking data, including every KPI and comparison that matters, Tegus by AlphaSense enables investors to move faster, gather deep research and surface high-quality insights to drive better decisions. The company serves customers worldwide, including investment analysts, portfolio managers and key decision makers across public and private businesses in markets of all sizes.
• Logistics: To access the Tegus by AlphaSense building, we require first and last names of those who RSVP'd by May 13. Attendees will then present their IDs when they arrive at the front desk (right when they enter the building). They will be sent up in the elevator to the 11th floor where we will be.