Fundamental Factor Models using Machine Learning

Abstract

Fundamental factor models are one of the important methods for the quantitative active investors (Quants), so many investors and researchers use fundamental factor models in their work. But often we come up against the problem that highly effective factors do not aid in our portfolio performance. We think one of the reasons why is that the traditional method is based on multiple linear regression. Therefore in this paper, we tried to apply our machine learning methods to fundamental factor models as the return model. The results show that applying machine learning methods yield good portfolio performance and effectiveness more than the traditional methods.