Factor Investing with Python

A new series of Python in Finance with a practical example. Let’s learn something about how professional money managers are handling the portfolios and where Python can be used.

Motivation

With the limited amount of good quality data available for less cost, the most common articles on Medium are talking about using ML/AI to predict the returns with only the pricing data, which are less likely to generate long term stable returns, because we are missing the other important information.

In real life, professional money managers won’t do so. They have a very comprehensive method to make decisions on what asset to hold by how much and one of the common approaches is Factor Investing.

Factor Investing

I have been reading on Medium for years and one of the rare topics is Factor Investing. The factor Investing, though, is not an unfamiliar topic in the professional money management industry. No matter you are a quant or a traditional portfolio manager, you will at least hear the word “Factor”.

A good explanation from Investopedia:

Factor investing is a strategy that chooses securities on attributes that are associated with higher returns. There are two main…