Factor Construction with Different Lookbacks

Does the lookback matter for stock selection?

Nicolas Rabener
10 min read
16 Sep 2024

SUMMARY

  • Intuitively quant strategies should benefit from new information and shorter lookbacks
  • However, fundamental-based factors improve from longer lookbacks given more robust signals
  • Less relevant for price-based factors like momentum or low volatility

INTRODUCTION

The world is a complex system that never stands still and continuously evolves, which makes investing interesting but also challenging. Companies have to change each day to survive in the brutally competitive economy. Most active fund managers have chosen to play along and prioritize the latest quarterly earnings over the long-term outlook of companies.

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