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Forest through the Trees: Building Cross-Sections of Stock Returns
We build cross-sections of asset returns for a given set of characteristics, that is, managed portfolios serving as test assets, as well as building blocks for tradable risk factors. We use decision trees to endogenously group similar stocks together by selecting optimal portfolio splits to span the stochastic discount factor, projected on individual stocks. Our portfolios are interpretable and well diversified, reflecting many characteristics and their interactions. Compared to combinations of dozens (even hundreds) of single/double sorts, as well as machine-learning prediction-based portfolios, our cross-sections are low-dimensional yet have up to three times higher out-of-sample Sharpe ratios and alphas.
Ketersediaan
| Call Number | Location | Available |
|---|---|---|
| PSB lt.2 - Karya Akhir (Majalah) | 1 |
| Penerbit | United States: American Finance Association 2025 |
|---|---|
| Edisi | Vol. 80 Issue 5, Oct 2025 |
| Subjek | Stock return Asset pricing Decision Trees |
| ISBN/ISSN | 1540-6261 |
| Klasifikasi | NONE |
| Deskripsi Fisik | 60 p. |
| Info Detail Spesifik | The Journal of Finance |
| Other Version/Related | Tidak tersedia versi lain |
| Lampiran Berkas |