Chris Carrano – Designing Practical Factor Models (S7E20)

In this episode of "Flirting with Models," Corey Hoffstein interviews Chris Carrano, Vice President of Strategic Research at Venn by Two Sigma, about factor-based investing and risk modeling. Carrano shares his background and how his views on factors have evolved through different roles, from smart beta to long-short hedge funds. The discussion covers the philosophy and design behind Venn, its use of orthogonalized factors, and its approach to reducing overfitting while prioritizing interpretability. They also tackle challenges like analyzing private markets with sparse data and trusting synthetic return streams. The conversation explores how to make factor results actionable through stress testing and portfolio diagnostics, and concludes with Carrano's current obsession: building a Pokemon card index.