Cross-Sectional Factor-Based Models and Trading Strategies
In the construction of factor models, factors are constructed from company characteristics and market data. In this entry, we explain and illustrate how to include multiple factors with the purpose of developing a dynamic multifactor trading strategy that incorporates a number of common institutional constraints such as turnover, transaction costs, sector, and tracking error. For this purpose, we use a combination of growth, value, quality, and momentum factors. ...
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