I have been away from the Q forum for most of this year and have just seen your post & whitepaper.
This answers a number of questions that were previously unresolved for me. Many thanks indeed to you for your clear exposition.
I now ask for your help with a question that may seem rather pedantic and perhaps has already been dealt with elsewhere, but please bear with me....
In the new format (since I last saw it) version of the Backtester, on the overview page there are displays of Common Returns & Specific Returns. Presumably these correspond exactly to the returns associated with Common Risk and Specific Risk respectively, as now clearly explained in your paper, in which it is stated: "Common risk is defined here as risk attributable to common factors which drive returns within the equity stock market". In the Q Risk Model there are 11 Sector Factors and 5 Style Factors, making a total of 16 (common) factors in all, as used by Q. Although I do not see it stated explicitly, it is therefore my interpretation that the Specific Returns as shown in the backtester are presumably the returns attributable to any causes OTHER than to the 16 factors used in the Q model, i.e. the "Specific Returns" of any given algo are the returns that are NOT explained by any of the existing factors in the Q risk model. Sorry if this sounds rather pedantic, but please can you confirm if I do indeed have this correct?
If so then....
to @Rene and @Delaney
it would be my understanding that presumably:
1) Q actually WANTS the Specific returns to be high as they represent something essentially "new", or at least something that is not captured by the existing Q risk model, right?
2) Presumably Q could potentially add more Style (or other) factors to the risk model. If that was done, then the associated returns would be taken out of "Specific" and placed into "Common" risks & returns. Is that correct?
3) Two seemingly very obvious candidates for additional factors are Liquidity and Quality, neither of which are contained within the existing list of 5 Style Factors but which are often used in stock trading system designs outside of the Q context. Is there any particular reason why these 2 additional factors were NOT included in the list currently in Q's risk model?
4) Is it helpful (either to Q or to the algo author) to openly specify other known or likely factors like this, or is this somehow "giving away the secret sauce"?
Finally a cheeky response to @Joakim: I agree that tulip mania (and other manias) are definitely largely Momentum-driven, but do you think tulips are really consumer CYCLICAL ..... or could there be more to it than that? Think Bitcoin?? ;-))
Cheers, best regards, TonyM.