Multi-Factor Modeling
This process transforms raw factor scores so each has a normal distribution, making them comparable.
What is rank‑normalization?
This happens when investors give too much weight to the first number or piece of information they see.
What is anchoring bias?
By taking offsetting positions in correlated securities or derivatives, this approach limits potential portfolio losses from adverse price movements.
What is hedging?
These instruments adjust their payments based on movements in a consumer price index, protecting investors against erosion of purchasing power.
What are inflation-indexed bonds?
This MFM phase is a combination of similar normalized factor scores into a single score.
What is a subcomposite?
This theory explains why people take on more risk when faced with potential losses.
What is prospect theory/loss aversion?
This style of hedge fund diversifies across multiple approaches—e.g. global macro, event‑driven, and relative‑value—in a single pooled vehicle.
What is a multi-strategy hedge fund?
This type of funding is provided without expectation of any financial return, solely to advance social or environmental goals.
What is philanthropic capital?
This is a quantitative investing approach that identifies and incorporates multiple alpha drivers such as size, value, and momentum to explain returns.
What is multi-factor modelling?
This meltdown began when the U.S. housing bubble burst, mortgage‑backed securities plunged in value, and major financial institutions like Lehman Brothers collapsed.
What was the GFC?
This metric is useful but penalizes upside and downside volatility equally.
What is the Sharpe Ratio?
These instruments are increasingly used in recent times by insurance companies to transfer risks arising from climate change.
What is a catastrophe bond?
One strategy is to combine multiple subcomposites which have low correlation.
How can we improve/build a good multi-factor model?
One potential symptom of this phenomenon is investors’ returns being eaten up by transaction costs.
What is overconfidence/overtrading?
Critics argue that many hedge funds merely deliver this broad market risk exposure rather than true, manager‑driven outperformance.
Beta/Are hedge funds just traditional beta?
Under this government‑endorsed scheme, Singaporean homeowners aged 65+ can receive regular cash payments against their HDB flat’s value, with the loan and accrued interest repaid only when the home is sold.
What is a reverse mortgage?