{"id":7370,"date":"2018-11-13T14:55:29","date_gmt":"2018-11-13T13:55:29","guid":{"rendered":"https:\/\/www.uni.lu\/fr\/events\/cancelled-forest-behind-the-trees\/"},"modified":"2018-11-13T14:55:29","modified_gmt":"2018-11-13T13:55:29","slug":"cancelled-forest-behind-the-trees","status":"publish","type":"events","link":"https:\/\/www.uni.lu\/fr\/events\/cancelled-forest-behind-the-trees\/","title":{"rendered":"CANCELLED &#8211; Forest Behind the Trees"},"content":{"rendered":"<section class=\"wp-block-unilux-blocks-free-section section\"><div class=\"container xl:max-w-screen-xl\"><p>This event has been cancelled and should be rescheduled in 2019.\u00a0<\/p><p>Abstract<\/p><p>Sorting-based strategy of building portfolios has been a default empirical approach in asset pricing for creating both test assets and factor-mimicking returns. One of the natural limitations of this technique, however, is its inability to adequately reflect the information contained in more than 2 characteristics and their interaction. Yet recent advances in empirical asset pricing have repeatedly\u00a0highlighted the importance of the latter, e.g.\u00a0Freyberger et al (2017), \u00a0Kozak et al (2018).\u00a0We propose to analyze the effect of a large number of characteristics on expected stock returns with the machine learning technique known as random forest. As an ensemble learning method for classification, the new approach is particularly well-suited for building composite cross-sections of portfolios that reflect the rich conditional information contained in a large number of characteristics simultaneously, and can be viewed as a natural generalization of the conventional sorting-based strategies. We build\u00a0decision trees\u00a0for\u00a0various sets of stock-specific characteristics, and demonstrate that the new approach is able to create cross-sections that a) reflect the information in a joint conditional distribution of characteristics, b) are challenging to price based on the conventional models, even when\u00a0pitted against the tradable factors based on the underlying characteristics, and c) imply investment strategies that achieve yearly\u00a0out-of-sample Sharpe ratios above 2.<\/p><\/div><\/section>","protected":false},"excerpt":{"rendered":"<p>This event has been cancelled and should be rescheduled in 2019.\u00a0<\/p>\n","protected":false},"author":0,"featured_media":7371,"parent":0,"menu_order":0,"comment_status":"open","ping_status":"closed","template":"","format":"standard","meta":{"featured_image_focal_point":[],"show_featured_caption":false,"ulux_newsletter_groups":"","uluxPostTitle":"","uluxPrePostTitle":"","_trash_the_other_posts":false,"_price":"","_stock":"","_tribe_ticket_header":"","_tribe_default_ticket_provider":"","_tribe_ticket_capacity":"0","_ticket_start_date":"","_ticket_end_date":"","_tribe_ticket_show_description":"","_tribe_ticket_show_not_going":false,"_tribe_ticket_use_global_stock":"","_tribe_ticket_global_stock_level":"","_global_stock_mode":"","_global_stock_cap":"","_tribe_rsvp_for_event":"","_tribe_ticket_going_count":"","_tribe_ticket_not_going_count":"","_tribe_tickets_list":"[]","_tribe_ticket_has_attendee_info_fields":false,"event_start_date":"2018-11-22 12:30:00","event_end_date":"2018-11-22 13:45:00","event_speaker_name":"Svetlana Bryzgalova - London business School","event_speaker_link":"","event_is_online":false,"event_location":"Luxembourg School of Finance\r\nJFK Building \r\n29,Avenue J.F Kennedy\r\nL-1855 Luxembourg\r\nGround Floor, Nancy Room","event_street":"","event_location_link":"","event_zip_code":"","event_city":"","event_country":"LU"},"events-topic":[309],"events-type":[],"organisation":[116,101,226],"authorship":[],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.3 (Yoast SEO v22.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>CANCELLED - Forest Behind the Trees - Universit\u00e9 du Luxembourg<\/title>\n<meta name=\"description\" content=\"This event has been cancelled and should be rescheduled in 2019.\u00a0\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.uni.lu\/fr\/events\/cancelled-forest-behind-the-trees\/\" \/>\n<meta property=\"og:locale\" content=\"fr_FR\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"CANCELLED - 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