[퀀트 공부] Where Does Alpha Comes From?

The quantitative investment approach emerged with the development of economet- rics, data, and computer technology. Some advantages that quantitative managers have relative to more traditional managers are a consistent and repeatable investment process, transparent risk control, and effective implementation.

In this section, we present a general process of alpha modeling in industry in the context of a stock selection strategy. We illustrate how to build a multi-factor model for security return forecasting.

Recall from Chap. 1 that a typical quantitative investment process usually starts with an investment strategy within a particular investment universe, and an alpha model for return forecasting within that universe is a critical component.

Strategy with return/risk targets ⇒ Alpha model ⇒ Portfolio construction with constraints and risk control ⇒ Trading and rebalance ⇒ Performance attribution.

A common approach to the Alpha model part is to build a multi-factor model, with each factor capturing certain aspects of future returns of the assets in the selected investment universe. In the following subsection, we describe primary types of factors used by quantitative strategies in the industry today.

Simple Linear Multi-Factor Alpha Model

 

Alpha with Fundamental Factors of Stock (Intuitive Analysis)

 

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Source & Reference

- Quantitative Investment from Theory to Industry (2020)

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