Uncovering Sparsity and Heterogeneity in Firm-Level Return Predictability Using Machine Learning
“Portfolios formed to exploit such group-varying predictions based on a parsimonious set of characteristics deliver economically meaningful returns with low turnover.”
StrategyMachine learning
TechniqueLinear factor model
FrequencyMonthly
Missing from abstract: benchmark, out-of-sample test, costs, multiple testing, universe
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The paper's neighbourhoodMachine learning return prediction by year
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