PT - JOURNAL ARTICLE AU - Zura Kakushadze AU - Willie Yu TI - Betas, Benchmarks, and Beating the Market AID - 10.3905/jot.2018.13.3.044 DP - 2018 Jul 31 TA - The Journal of Trading PG - 44--66 VI - 13 IP - 3 4099 - https://pm-research.com/content/13/3/44.short 4100 - https://pm-research.com/content/13/3/44.full AB - This article provides an explicit formulaic algorithm and source code for building long-only benchmark portfolios and then using these benchmarks in long-only market outperformance strategies. The benchmarks (or the corresponding betas) do not involve any principal components, nor do they require iterations. Instead, the authors use a multifactor risk model (which uses multilevel industry classification or clustering) specifically tailored to long-only benchmark portfolios to compute their weights, which are explicitly positive in the construction.TOPICS: Factor-based models, portfolio construction, statistical methods