Causal factor investing : : can factor investing become scientific? / / Marcos M. López de Prado, ADIA Lab.
Virtually all journal articles in the factor investing literature make associational claims, instead of causal claims. Authors do not identify the causal graph consistent with the observed phenomenon, they justify their chosen model specification in terms of correlations, and they do not propose exp...
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Superior document: | Cambridge elements. Elements in quantitative finance, |
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Place / Publishing House: | Cambridge, United Kingdom ; New York, NY : : Cambridge University Press,, 2023. |
Year of Publication: | 2023 |
Edition: | First edition. |
Language: | English |
Series: | Cambridge elements. Elements in quantitative finance,
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Physical Description: | 1 online resource (81 pages) :; digital, PDF file(s). |
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López de Prado, Marcos Mailoc, author. Causal factor investing : can factor investing become scientific? / Marcos M. López de Prado, ADIA Lab. First edition. Cambridge, United Kingdom ; New York, NY : Cambridge University Press, 2023. 1 online resource (81 pages) : digital, PDF file(s). text txt rdacontent computer c rdamedia online resource cr rdacarrier Cambridge elements. Elements in quantitative finance, 2631-8571 Open Access Title from publisher's bibliographic system (viewed on 12 Oct 2023). Virtually all journal articles in the factor investing literature make associational claims, instead of causal claims. Authors do not identify the causal graph consistent with the observed phenomenon, they justify their chosen model specification in terms of correlations, and they do not propose experiments for falsifying causal mechanisms. Absent a causal theory, their findings are likely false, due to rampant backtest overfitting and incorrect specification choices. This Element differentiates between type-A and type-B spurious claims, and explains how both types prevent factor investing from advancing beyond its current phenomenological stage. It analyzes the current state of causal confusion in the factor investing literature, and proposes solutions with the potential to transform factor investing into a truly scientific discipline. This title is also available as Open Access on Cambridge Core. Investments. Asset allocation. Portfolio management. 9781009397292 Cambridge elements. Elements in quantitative finance, 2631-8571. |
language |
English |
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author |
López de Prado, Marcos Mailoc, |
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López de Prado, Marcos Mailoc, Causal factor investing : can factor investing become scientific? / Cambridge elements. Elements in quantitative finance, |
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López de Prado, Marcos Mailoc, |
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López de Prado, Marcos Mailoc, |
title |
Causal factor investing : can factor investing become scientific? / |
title_sub |
can factor investing become scientific? / |
title_full |
Causal factor investing : can factor investing become scientific? / Marcos M. López de Prado, ADIA Lab. |
title_fullStr |
Causal factor investing : can factor investing become scientific? / Marcos M. López de Prado, ADIA Lab. |
title_full_unstemmed |
Causal factor investing : can factor investing become scientific? / Marcos M. López de Prado, ADIA Lab. |
title_auth |
Causal factor investing : can factor investing become scientific? / |
title_new |
Causal factor investing : |
title_sort |
causal factor investing : can factor investing become scientific? / |
series |
Cambridge elements. Elements in quantitative finance, |
series2 |
Cambridge elements. Elements in quantitative finance, |
publisher |
Cambridge University Press, |
publishDate |
2023 |
physical |
1 online resource (81 pages) : digital, PDF file(s). |
edition |
First edition. |
isbn |
1-009-39730-3 1-009-39732-X 1-009-39731-1 9781009397292 |
issn |
2631-8571 |
callnumber-first |
H - Social Science |
callnumber-subject |
HG - Finance |
callnumber-label |
HG4521 |
callnumber-sort |
HG 44521 L819 42023 |
illustrated |
Not Illustrated |
dewey-hundreds |
300 - Social sciences |
dewey-tens |
330 - Economics |
dewey-ones |
332 - Financial economics |
dewey-full |
332.6 |
dewey-sort |
3332.6 |
dewey-raw |
332.6 |
dewey-search |
332.6 |
work_keys_str_mv |
AT lopezdepradomarcosmailoc causalfactorinvestingcanfactorinvestingbecomescientific |
status_str |
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Cambridge elements. Elements in quantitative finance, |
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Causal factor investing : can factor investing become scientific? / |
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Cambridge elements. Elements in quantitative finance, |
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