Chris Carrano – Designing Practical Factor Models (S7E20)
Show notes
In this episode, I speak with Chris Carrano, Vice President of Strategic Research at Venn by Two Sigma.
Chris has had a rare vantage point in the world of factors — spanning smart beta, long/short hedge funds, and risk modeling — and that experience has shaped a thoughtful view of what factors really are and how they can be practically used.
We dive into the philosophy and design behind Venn: why it uses just 18 orthogonalized factors, how it blends Lasso and OLS to reduce overfitting, and why it prioritizes interpretability over complexity.
We also tackle messy real-world challenges: how to analyze private markets with sparse data, how to trust synthetic return streams, and where to draw the line when using monthly snapshots that embed structural portfolio shifts.
Finally, we explore what it means to make factor results actionable—whether through stress testing, residual interpretation, or portfolio diagnostics.
Please enjoy my conversation with Chris Carrano.