Insight

Can Machine Learning enhance systematic incorporation of equity signals?

Can Machine Learning enhance  systematic incorporation of equity  signals?

In theory, an investor can achieve above-market performance by obtaining better information or having a better process to distil relevant information from the available data. We conduct an experiment to evaluate whether machine learning (ML) can enable better inference of future returns from stock characteristics such as earnings yield, profitability, and momentum.

Our findings suggest that while employing a non-linear ML model may lead to improved signal processing, thoughtful transformation of raw signals potentially further enhances information extraction of the ML model.

Download the paper to learn more.

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