Overview

The last topic decides. A shrinking information coefficient, a short-leg crash, and a shared book that deleverages are three different ways a factor portfolio fails, and only one of them is a reason to reject the specification on the evidence in hand. The capstone writes the memo — mechanism, test design, implementability, monitoring — and rejects standalone book-to-price. The rejection is a result the committee can file.

By the end of this note you should be able to:

• use short interest and active-manager holdings as crowding proxies, with their staleness stated;
• place the momentum losses Paleologo describes on the short leg, including the early-2016 energy move, without treating them as a book-to-price premium;
• write a four-block memo whose decision is promote or reject, and defend a rejection from the reported $t$-statistics.

1. Contents
2. The big picture