Investing 5.0—Factor Models, Algorithms, and Chasing Alpha

Gary Smith () and Margaret Smith ()
Additional contact information
Gary Smith: Pomona College

Chapter Chapter 5 in The Power of Modern Value Investing, 2023, pp 85-102 from Springer

Abstract: Abstract The Capital Asset Pricing Model (CAPM) is an extension of mean–variance analysis that distinguishes between risk that can be diversified away and market risk, which cannot. Shortly after the efficient market hypothesis became popular, researchers began accumulating evidence of so-called anomalies—investment strategies that beat the market—and incorporating these anomalies into CAPM as additional factors. A well-known example is the Fama–French factor model. This ransacking of data for anomalies has been facilitated by the use of computer algorithms (algos). CAPM, factor models, and black-box algorithms all lure investors away from value investing because they focus on short-term price movements.

Date: 2023
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-45900-9_5

Ordering information: This item can be ordered from
http://www.springer.com/9783031459009

DOI: 10.1007/978-3-031-45900-9_5

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().