Q2: Jessica Stauth – Seeking Alpha? Try Alpha Factors
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What Is a Risk Factor?
Risk factors are probably one of the main techniques in modern risk management because your risk is often measured or quantified by risk factors. Any alpha factor will produce portfolio weights you know and from portfolio weights over time you can say what would my returns have been if I were able to trade this portfolio again. Professional quants really don't spend any time back testing not or not any but don't spend that much time back testing as a lot of what they do is hypothesis work where they're trying to see if this alpha factor spreads out returns.
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