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Next Boston QWAFAFEW Meeting: Tuesday, Tuesday, 18 Sep 2018 

September 18 @ 6:00 pm - 8:00 pm

| $30

Next Boston QWAFAFEW Meeting: Tuesday, Tuesday, 18 Sep 2018 

  The Fundamental Myths of Fundamental Models

A QWAFAFEW discussion led by:

Dan diBartolomeo

Abstract

Many investment organizations have come to the belief that “fundamental” (endogenous) models of equity returns and risk are somehow more useful than other models for a variety of reasons.  While some of these reasons are correct there are important aspects of fundamental models that are widely misunderstood.  In particular, the assertion that fundamental models are inherently more accurate than other risk model structures is entirely false.   The purpose of this presentation is to make clarify the nuances as to what is and is not real about fundamental models in comparison to other model frameworks of return and risk.   For purposes of definition we will consider a “fundamental” model as one where the factor exposures at the security level are observable at a moment in time.   The analytical structure of the model then involves statistical estimation of factor returns for each time period, and the estimation of the covariance matrix of these factor returns.   By way of example, we might think of the capitalization of a company, or the price/earnings ratio of the stock, or the membership of the firm in an industry group as “fundamental characteristics” which we can observe at the security level.   There is no need for statistical estimation of the information describing individual stocks or companies.   Often, the “fundamental” aspect of such models arising from the use of data elements from the firm’s financial statements (i.e. book/price ratio) which is in some measure parallel to the way that fundamental investors might view a particular stock.   It should be noted that our purpose is not to criticize fundamental models per se, but to illustrates the true benefits and disadvantages of this type of model.

Download: dan_fundamental_2018

Bio

Mr. diBartolomeo is President and founder of Northfield Information Services, Inc.  Based in Boston since 1986, Northfield develops quantitative models of financial markets.   He sits on boards of numerous industry organizations include IAQF and CQA, and past president of the Boston Economic Club.  His publication record includes thirty books, book chapters and research journal articles.  In January 2018, he became editor of the Journal of Asset Management.   Dan spent multiple years as a Visiting Professor at Brunel University, and has been admitted as an expert witness in litigation matters regarding investment management practices and derivatives in both US federal and state courts.

Time: 6:15 PM sharpe
3rd Floor of the Tennis & Racquet Club
939 Boylston Street

RSVP to hugh@QWAFAFEW.org
Mailing List and Payment Link: http://boston.qwafafew.org/

All annual dues ($150) should be paid to Boston QWAFAFEW by credit card, Bitcoin or check.

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By check
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Please RSVP for all meetings you plan to attend: hugh@QWAFAFEW.org
Guests who do not RSVP may have to wait to enter the meeting, due to space constraints (capacity=100, BFD).

Guest fees ($30) can be paid through EMA (check or PayPal, bring receipt) or bitcoin (at address above).  The $30 guest fee can be paid by bitcoin, cash or check at the door, no credit cards at the meeting.

Please bring exact change (eg: two twenties = $40 Guest Fee).

As always, if you have names or discussion topics, please forward them to any member of the Steerage Committee

Questions, comments:
bostonqwafafewbilling@gmail.com
hugh@QWAFAFEW.org

Steerage Committee:
Hugh Crowther
Dan diBartolomeo
Mike Dunn
Steve Gaudette
Sri Krishnamurthy
Mark Kritzman
John Minahan
Donna Cool Murphy (Dinners)
Larry Pohlman
Dan Potter
Dan Rie
Evan Schulman
Michael Wilcox

The members of the Steerage Committee are responsible for coordinating the program content.

Program suggestions from members are always welcome.

RSVP to: hugh@QWAFAFEW.org

Mailing List and Payment Link: http://boston.qwafafew.org/

 

 

 

 

 

 

 

 

 

 

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Boston QWAFAFEW · POB · Boston, MA 02109 · USA

Details

Date:
September 18
Time:
6:00 pm - 8:00 pm
Cost:
$30

Organizer

Hugh
Email:
hugh@QWAFAFEW.org

Venue

Tennis & Racquet Club
3rd Floor of the Tennis & Racquet Club, 939 Boylston Street
Boston, MA,
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