Rapid Discovery of Alpha Generating Factors

Once the data access and integration phase is complete, the next step in the investment management life cycle is to test the forecasting performance of one or more factors to determine whether those factors are contributors to excess returns, and if so, to what degree.

ModelStation® Factor Backtesting

As a powerful and intuitive alpha research module, ModelStation's Factor Backtesting workflows support the rapid testing of any combination of single and multi-factor model "signals" and factors using quantile analysis techniques. In a few keystrokes, clients can quickly define and run a single or multi-factor returns analysis to quickly understand the predictive power of the factors involved. This powerful module is a key step in the model development process and can function as a stand-alone process or be used to feed alpha scores directly into ModelStation's Strategy Simulation module.

Key Benefits:

• Accelerate the construction of effective factor models
• Build proprietary models for specialized universes
• Identify optimal holding periods
• Understand interaction between multiple factors in matrix format

Feature Summary:

• Test single factor or multi-factor models
• Evaluate the interaction between two factors
• Test historical predictions from forecast models with no look-ahead bias
• Leverage proprietary pre-regression genetic algorithms to surface optimal factors and their coefficients
• Support for both fundamental and technical factors
• Quantile drilldown per sector, industry, or custom grouping