by Kim Christensen, Mark Podolskij, Roel Oomen
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Suggested foundations for probability and statistical reasoning and asset pricing and factor research. Specialist prerequisites vary by paper.
Read the distributions and expectations used in probabilistic arguments.
Interpret expectations after information is observed.
Interpret exposures, residuals and uncertainty in fitted coefficients.
Work with returns and recognise their empirical limitations.
Assess uncertainty rather than treating an estimate as a fact.
Connect factor definitions to portfolio construction.
Distinguish exposure estimation from tests of expected returns.
Move from conditioning and expected values to timed problems with a defensible solution.
Connect diversification, common risk factors, investor views, and the properties of a risk measure.