Assignment 5
MGMT 638: Data-Driven Investments: Equity
Rice University
Backtest at least two random forest models for your sector, one for each definition of the target. Other models could be backtested using different max_depth or a different number of years for training data or a different number of stocks or excluding or including large caps, etc. Your evaluation should contain the following:
- Is the strategy successful in identifying good stocks and bad stocks?
- Does it produce alpha relative to the market?
- Does it have significant factor betas and does it produce alpha relative to the factor model?
- What features does it seem to be using and how - that is, does it produce higher forecasts when the feature is larger or when the feature is smaller?