Multifactor Trading Model within the Russell 1000
Updated: Jun 3, 2022
Orenda Software Solutions Inc.
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In this paper, we develop an expansion of Fama and French three-factor model. This was achieved by defining and incorporating Orenda’s risk factor, as an efficient measure of corporate social alignment, with the objective of uncovering mispriced securities within the Russell 1,000, for the period of November 18th, 2015 to April 30th, 2020. Our hypothesis proposes that by applying statistical techniques to this newly designed asset pricing model, market participants could capitalize on long and short trading signals achieving superior risk adjusted and absolute returns.