Causal Factor Investing

Préface
Analyzes the current state of causal confusion in the factor investing literature, and proposes solutions.

Résumé
Virtually all journal articles in the factor investing literature make associational claims, instead of causal claims. This Element analyzes the current state of causal confusion and proposes solutions with the potential to transform factor investing into a truly scientific discipline. This title is also available as Open Access on Cambridge Core.

Contenu

1. Introduction; 2. Association vs. Causation; 3. The Three Steps of Scientific Discovery; 4. Causal Inference; 5. Causality in Econometrics; 6. Causality in Factor Investing; 7. Monte Carlo Experiments; 8. Conclusions; Appendix.