Can factor investing become scientific?

A new paper, Causal factor investing: Can factor investing become scientific?, has been written by our esteemed colleague Marcos Lopez de Prado of Cornell University, Abu Dhabi Investment Authority and True Positive Technologies.

In his 75-page preprint, Lopez de Prado argues that almost all journal articles in the “factor investing” literature make assertions that are merely associational observations from statistical analyses, with no attempt to connect these findings to any coherent underlying theory. In other words, these authors justify their chosen model specification merely in terms of correlations or other statistics, and they do not propose experiments for falsifying causal

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