This article offers an incisive look into the factor vetting process, crucial for developing effective stock selection models in finance. It highlights the importance of distinguishing robust factors from mere statistical noise, minimizing multicollinearity, and preventing overfitting to enhance model performance.
In this quarter’s update, we begin by looking at interest rates at the very broadest levels, i.e. Treasury markets and Federal Open Market Committee (FOMC) actions. We then take stock of the fixed income landscape, looking at current market metrics against a historical backdrop.
In recent years, the investment landscape has been significantly influenced by unprecedented monetary and fiscal stimuli, leading investors to focus on changes in inflation. But the front lines for significant government and central banks’ war against inflation have significantly diverged.
The key question going into the final quarter of 2023 and glancing towards 2024, is whether U.S. consumers, that account for roughly two-thirds of its total activity, will continue to keep the economy afloat.
Already responsible for an estimated $5 billion in stimulative consumer spending – the equivalent of the entire annual earnings of Starbucks, American Airlines, or FedEx – the Taylor Swift ‘Eras’ Tour is doing more than its part to save the global economy. However, the economic phenomenon being dubbed ‘Swiftonomics’ will forsake China, as the pop legend’s tour plays four dates in Japan and a record six dates in Singapore, but not in the world’s second largest economy.
The ensemble approach, in a broad sense, refers to combining multiple units (which could be models, methods, or components) to work together to achieve more accurate and reliable outcomes than any individual unit could achieve alone. This is akin to making a decision based on the collective wisdom of a diverse group, rather than relying on a single opinion.
