Concept · The RiskModels engine (ERM3)
ERM3
Equity Risk Model v3 — the engine. Decomposes any US equity into market → sector → subsector → residual via a hierarchical orthogonal cascade.
In depth
Equity Risk Model v3 — the engine behind every snapshot and the research. A hierarchical orthogonal cascade decomposes any US equity into market → sector → subsector → residual, with tradeable ETF hedge ratios. Validated out-of-sample on 5,910 stocks over 19 years.
Compute it with the API
POST /api/decompose
# pip install riskmodels-py
client.decompose("NVDA")In the methodology
The big picture →Referenced by (7)
- Beyond Active Share
A within-mandate manager-efficiency framework using ERM3 residual decomposition
- The Industry Beneath the Index
Vasicek peer-β cross-sections expose what sector ETFs paper over
- Decile One, Not Ticker by Ticker
Server-side rank screening turns the universe into one queryable cross-section
- Cascade Hedging and the Cost of Interpretability
Subsector ETF value, joint optimization, and executable hedge layers across 9,074 US mutual funds
- RiskModels Quarterly Funds Report — Q1 2026
Top cohort holdings refresh, factor decomposition, and residual winners for the March 2026 reporting window
- Who got NVDA right before it became benchmark exposure?
Early ownership, active conviction, and residual attribution in U.S. mutual-fund managers, 2019–2026
- ERM3 Cascade-Residual Persistence and the Allocator Skill Signal
Top-decile rank persistence, active-share comparison, and tail-stratified inference across 1,000 top-AUM US mutual funds