Multi-(Horizon) Factor Investing with AI
Ruslan Goyenko and Chengyu Zhang (McGill University)
April 2023
Can the backbone technology behind ChatGPT create and manage portfolios? We apply this tech-engine, adapted for finance applications, to multi-factor investing by a long-horizon investor who uses bigger that traditionally used data and takes into consideration long-term versus short-term volatility, liquidity and trading costs trade offs while maximizing expected portfolio returns. The answer is yes, as we are able to actively time factors’ premium realizations while dynamically re-balancing and diversifying between factors. Moreover, the long horizon perspective is critical, as it allows for more patient trading and re-balancing needs, more strategic factor timing, and a different set of fundamental signals to rely on.

Continue reading →

* House Speaker McCarthy meets with Taiwan’s president, defying China
* Wall Street should worry about debt-ceiling risk, says House Speaker McCarthy
* France’s Macron begins talks with China’s Xi Jinping
* US-China tensions will cost world economy 2% of output, estimates IMF
* China service sector growth accelerates in March
* Norway is now Europe’s main supplier of fossil fuels
* US services sector growth eases more than expected in March
* US private hiring rose less than expected in March via ADP data:

Continue reading →