Exploiting Market Integration for Pure Alpha Investments via Probabilistic Principal Factors Analysis

@inproceedings{Tzagkarakis2013ExploitingMI,
  title={Exploiting Market Integration for Pure Alpha Investments via Probabilistic Principal Factors Analysis},
  author={George Tzagkarakis and Juliana Caicedo-Llano and Thomas Dionysopoulos},
  year={2013}
}
In this paper, a long-short beta neutral portfolio strategy is proposed based on earnings yields forecasts, where positions are modified by accounting for time-varying risk budgeting by employing an appropriate integration measure. In contrast to previous works, which primarily rely on a standard principal component analysis (PCA), here we exploit the… CONTINUE READING