Feature selection of factors with denoised equity prices
| Conventional equities | Islamic equities | ||||||
|---|---|---|---|---|---|---|---|
| Factors | Sequential feature selection | LASSO | LASSO coefficients | Sequential feature selection | LASSO | LASSO coefficients | |
| Momentum factors | Momentum 1-month | ✓ | ✓ | 1.153 | Yes | ✓ | 1.192 |
| Momentum 3-month | ✓ | ✓ | 1.543 | Yes | ✓ | 1.518 | |
| Momentum 6-month | ✓ | ✓ | −0.119 | Yes | ✓ | −0.077 | |
| Momentum 9-month | Yes | ||||||
| Momentum 12-month | Yes | ||||||
| Value factors | Earnings/Price | ||||||
| Book/Market | ✓ | 0.069 | |||||
| EBIT/EV | ✓ | 0.021 | |||||
| EBITDA/EV | ✓ | 0.001 | |||||
| FCF/EV | ✓ | 0.009 | |||||
| Gross profits/EV | ✓ | 0.003 | |||||
| Quality factors | ROE | ||||||
| ROA | |||||||
| ROC | |||||||
| Gross profits/TA | ✓ | ||||||
| Earnings quality | |||||||
| Conventional equities | Islamic equities | ||||||
|---|---|---|---|---|---|---|---|
| Factors | Sequential feature selection | Sequential feature selection | |||||
| Momentum factors | Momentum 1-month | ✓ | ✓ | 1.153 | Yes | ✓ | 1.192 |
| Momentum 3-month | ✓ | ✓ | 1.543 | Yes | ✓ | 1.518 | |
| Momentum 6-month | ✓ | ✓ | −0.119 | Yes | ✓ | −0.077 | |
| Momentum 9-month | Yes | ||||||
| Momentum 12-month | Yes | ||||||
| Value factors | Earnings/Price | ||||||
| Book/Market | ✓ | 0.069 | |||||
| EBIT/EV | ✓ | 0.021 | |||||
| EBITDA/EV | ✓ | 0.001 | |||||
| FCF/EV | ✓ | 0.009 | |||||
| Gross profits/EV | ✓ | 0.003 | |||||
| Quality factors | |||||||
| Gross profits/TA | ✓ | ||||||
| Earnings quality | |||||||
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