by Koijen, Ralph S. J., Lustig, Hanno, Van Nieuwerburgh, Stijn
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Suggested foundations for financial time series and asset pricing and factor research. Specialist prerequisites vary by paper.
Check whether a relationship can be estimated consistently over time.
Interpret exposures, residuals and uncertainty in fitted coefficients.
Work with returns and recognise their empirical limitations.
Study long-run relationships without confusing them with correlation.
Check the assumptions behind reported estimates.
Connect factor definitions to portfolio construction.
Choose a reproducible strategy, specify the trading rule, and test what remains after costs and estimation uncertainty.
Connect diversification, common risk factors, investor views, and the properties of a risk measure.