I’d like to read that paper if you can find it, please. Thanks!
Thanks so much. It’s a very interesting read.
This paper only combines two factors at a time and then tests those combinations. So it takes 102 factors and generates 10,302 combinations. And the out-of-sample alpha of the top 10% was not comparable to the best machine-learning algorithms: only the out-of-sample Sharpe ratio was (the out-of-sample alpha was actually pretty low). What consistently beat machine-learning algorithms, but not in terms of Sharpe ratios, was investing (long-short) in the one two-factor combination that had the highest Sharpe ratio in the past. And that two-factor combination almost always included, as one of the factors, short-term reversal.
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