Markov Processes International

An Eye on the Residuals: MPI Presents to CFA Societies on Dynamic Factor Analysis

In conjunction with the CFA Societies of the UK, France and Germany, MPI recently presented at sold-out events in London, Paris and Frankfurt in an effort to address best practice quantitative methodologies for dynamic factor analysis and their applications for the wealth and investment management industry.

The presentation, entitled “Hidden sources of alpha: from market timing to insider trading”, asked, “What portion of a manager’s returns is due to luck or skill, leverage, excessive risks, or clever and timely market bets and use of derivatives? Is there any indication of wrongdoing? How can we find the answers, especially when a portfolio’s positions are not available or suspect?”

Looking to answer these questions with the predictive powers of MPI’s proprietary method for dynamic factor analysis, Dynamic Style Analysis (DSA) – via case studies of the Flash Crash and Galleon Group – MPI’s CEO and Director of Research, Michael Markov, counseled practitioners to “focus on the residuals” when analyzing and monitoring funds and investment portfolios.

Transcending the limitations imposed by traditional returns-based style analysis (RBSA), DSA empowers users to capture active portfolio dynamics, such as rapid strategy shifts and leverage, and utilize multiple return sources to precisely measure the predictability of an investment. DSA was patented in 2009 and is available in MPI’s flagship product, Stylus Pro.

To see the presentation, Contact Us.

Exit mobile version