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Lecture 24 Ranking Universes by Factors - a few questions to ask

Really like this lecture, which for me is key, as it speaks to the fundamental law of active management (Grinold and Kahn) and in particular the information coefficient.

  1. Want to verify the code on the Monthly Returns - should the window length be like 22 (not 30)
  2. Should the month_forward_returns variable be shifted by -1
  3. What level for the mean rank correlation coefficient should be good enough as initial evidence for predictive ability ie looking for a ballpark estimate/benchmark to meet before taking the next step of including the factor in a backtest
  4. Similarly for the level of mean spread between high - low decile (monthly basis)
  5. Same for spread consistency - some metrics to guide me eg number months positive spread or something on its dispersion I guess...

Thanks

Peter

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3 responses

Hello Peter,

Great questions. 1 and 2 are bugs in the lecture we will fix ASAP. Points 3-5 aren't really covered in this lecture, but we're currently working on material that should answer those questions. Things like consistency of spread, size of spread, predictive window length, correlation between different spread, etc, are all important analysis points and we hope to be able to cover them.

Thanks,
Delaney

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Hi Delaney

Ok understood, look forward to the new material.

In the meantime, I'll look at some of the other well-known factors like value, momentum to get a feel for the numbers.

Thanks

Peter

Hey Peter,

We have actually been working on building up a library of common factors. It is still very much in its development and testing stage, so no guarantees about quality, but if you want to have a peek at it, here is the link https://github.com/quantopian/algorithm-component-library/blob/master/factors_project/factors_all.py .

Hopefully this is helpful!

Best,

Gil

Disclaimer

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.