XII · Factors
Station XII of The Quant Map: the same mechanism across an entire universe. Sorts, spreads, residuals. Reading order plus the free map PDF.
the same mechanism, systematically, across an entire universe
Factors come after one asset works end to end. A carry factor is the same question asked of every pair: high carry against low carry, and you no longer care whether AUDJPY rises.
A factor is the same mechanism asked of a whole universe, long the high slice, short the low slice. Single-name conviction leaves; monotonic buckets arrive.
The Quant Map PDF works this spine through example research: five full descents from observation to live rule, and a library of 835 strategy entries, each with a named payer and a named failure mode. Get the free PDF on the Start Here page.
Reading order
Top to bottom. Stop at the first article you cannot apply to a live trade; that is the one to read slowly.
| Article | Why it is on this row |
|---|---|
| What Is a Factor, Really | The same mechanism, applied to a universe, long the high slice and short the low slice. |
| What a Factor Actually Is: α + βλ, and Why the Market Is Factor #1 | Split the return into the market, the premia you are paid to hold, and a residual. Sell the residual last. |
| Predict Residual Returns, Not Gross | Gross return smuggles the beta. The thing you meant to forecast is what is left after the factor exposures. |
| Portfolio Sorts From Scratch: Deciles, Monotonicity, and the Long-Short Spread | Buckets have to rise in order. The long-short spread is the claim. A pretty top decile with a messy middle is a story. |
| Cross-Sectional Percentile Rank Within a Universe | Today's rank against the names you could have traded today. A rank against a future member list is leakage. |
On the map: ← XI · Strategy · The grand map · XIII · Multi-factor models →