Seeking alpha: Portfolio optimization in the small-cap value space
(Pictured left to right): Thomas Pettit, Neel Rajesh, Fabian Santillan
Prof. Markus Pelger
The Horton Fund makes private equity style investments in public companies.
The Horton Fund uses a given set of factors when analyzing portfolios to decide which investments to make. Our project was to create a more analytical approach, using different factors and signals to analyze whether a potential investment is a good decision or not.
Techniques and solutions
We utilized the RP-PCA method created by MS&E Professor Markus Pelger, regression, and single sort to create decile signal portfolios. We also used advanced statistical modeling to find signals that describe returns and create optimal portfolios in the small-cap public equity space.