Machine learning offers a set of powerful tools that holds considerable promise for investment management. As with most quantitative applications in finance, the danger of misapplying these techniques can lead to disappointment. One crucial limitation involves data availability. Many of machine...

The price of a stock may differ from its fundamental value by a random noise. In this case, small-capitalization and value stocks are more likely to have negative noise, while large-capitalization and growth stocks are likely to have positive noise. Negative price noise implies that...