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Hi Yuval. Interesting classification of factors. In your eyes, is there an objective way to determine whether a factor is augmentative, distributed or simply 'not significantly useful'? I can imagine that a first look at the marketcap factor would make one think it is a distrubuted factor, the same goes for some of the accruel factors.

A practical way I can think of myself is to first construct a ranking system (with one or more nodes) of 'direct' (linear) factors and subsequently add 'other factors' of which it is unclear whether they are distributed or augmentative. If using an 'other factor' in a way that punishes the top and bottom buckets results in better results for the ranking system than simply adding the plain 'other factor', this is a sign it is a distributed factor. And the oppositive way around. This test, plus some 'common sense' thinking (subjective test), where there is some intuition behind the top and bottom buckets underperforming (e.g. very large increases in margins being as bad as large very decreases because of instability of the businessmodel), should give a reasonable indication what type of factor you are dealing with.

Do you have an other (formal) process of determining the type of factor?



Yuval Taylor

No, I don't think there's an objective way to classify these factors. I think your conclusions in the second paragraph of your comment are absolutely sound.

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