Predicting Stock Returns Using Industry-Relative Firm Characteristics

This paper by Asness, Porter & Stevens (2000) examines return measures when explanatory variables into two industry-related components; within-industry variables and across-industry variables.  This paper helps explain why Atlas uses short-term momentum within sectors, but short-term reversal within individual securities.  It also elucidates the rationale for scoring momentum and value “within” sectors rather than across them.

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