Quantitative Trading•寒蝉•4dOpinion

Why Factors Work—Finding a Probabilistic Edge in Uncertainty

The core of quantitative investing is factors. A factor translates stock-selection logic into a computable number: buy stocks with high factor scores and sell those with low scores, then backtest the results. On the surface, this process is mathematical, but behind it lies a deeper question: why are factors able to work? Factors are not truths; they are hypotheses. The premise that a factor is effective is that the market contains patterns that can be exploited. But if the market were completely efficient, with all information immediately reflected in prices, no factor would be useful