XIII · Multi-factor models
Station XIII of The Quant Map: composites of carry, momentum, value. GRS, Fama-MacBeth, the factor zoo. Reading order plus the free map PDF.
composites: carry + momentum + value, regime-conditioned
Composition reopens the search. A leftover alpha in a regression is often a factor you left out. A zoo of published factors is a counted search; the t-stat you remember was the maximum of many tries. Timing the factors, turning them on and off with a second model, mostly fails once you count that second search. Cross-sectional machine learning, in the study that measured it carefully, lifts about 20%.
Composites inherit every search that built them, plus the new one that weights them. Count both before admiring the combined curve.
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 |
|---|---|
| The GRS Test: Your Alpha Is Probably a Missing Factor | A joint test on whether the leftovers are all zero. One shiny intercept is a single name in that test. |
| Fama-MacBeth Two-Pass and the Shanken Correction Nobody Applies | Cross-sectional slopes, then the error in those slopes. Skipping the correction makes the t-stats look finished. |
| The Factor Zoo and the Multiple-Testing Reckoning | Hundreds of published factors, one history. The bar moves once you count the tries. |
| Factor Timing Mostly Fails — the Honest Version | A second model that switches factors reopens the search. Most of the switching does not survive it. |
| Does ML Actually Help Asset Pricing? Kelly's 20%, Not 2–3× | The measured cross-sectional lift is about 20%. Read the multiple in the abstract against that. |
On the map: ← XII · Factors · The grand map · XIV · Alpha ensembles →