U of M Quant Stock Strategies Questions
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Total Points = 20
Upload the .ipynb files that you use to answer the questions, including the outputs.
1. (5 points) To back test whether Earnings/Price ratio is a useful signal, you use
data from Compustat and CRSP. What steps should you take when you merge
these datasets and compute P/E ratios to avoid a look-ahead bias?
2. (15 points).
a. Select two signals that potentially predict returns. Intuitively explain why
you expect these signals to predict returns. You can present the answer to
this question in a text cell in the .ipynb file. Select signals that we did not
used in class.
b. Assign scores based on these signals and present the following:
? Decile portfolio returns and the return difference between on the
extreme decile portfolios, and t-statistics
? Annualized information ratios for all portfolios.
Note: The performance of your signals would not affect the points for this
question.
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