An investment research and consulting company said it is releasing a suite of software tools for analyzing mutual funds based on the “three-factor” model of University of Chicago finance professor Eugene Fama and Dartmouth College professor Kenneth French.
The suite of
AlphaFunds uses the factor methodology of Fama and French to compute the (1) risk-adjusted returns (alphas) and (2) factor exposures of mutual funds, user-built mutual fund portfolios and user-uploaded portfolio returns.
In Fama and French’s models, three factors can be used to explain differences in stock returns: a stock’s beta, which captures its rate of movement compared to the market as a whole; the stock’s market capitalization and its value, in relationship to other prices.
AlphaFunds also is introducing its own version of beta, called down-market beta. This beta predicts a fund or portfolio’s return behavior in down markets, says Dr. Andy Lawson, financial economist and EMA Softech's director of research.
EMA Softech is an investment software developer based in Dallas, Texas.
