Take the 2-minute tour ×
Quantitative Finance Stack Exchange is a question and answer site for finance professionals and academics. It's 100% free, no registration required.

Could somebody tell me whether suggestions in bold true or not?

Q # 1: http://www.math.nyu.edu/faculty/avellane/AvellanedaLeeStatArb071108.pdf

Chapter 2.2 Interpretation of the eigenvectors/eigenportfolios

This paper says that loadings in the maximal eigenvector need to be all positive and should not change sign, what if i have negative ones, can i force them to be positive always by simply taking them by module, e.g. MathAbs(Vector) ?

Q # 2 : The same paper also defines weights for eigenportfolio in this way :

Q[i] = EigVecCoef[i] / StdDev[i]

There is also another paper that says that eigenvector is an angle (or direction) of the portfolio's spread which allows to map current portfolio's spread to initial axes (dimensions) :


So i do not understand - why do i need to divide each value in eigenvector by standard deviation to calculate weights if this portfolio is already mapped to initial axes?

share|improve this question

Your Answer


By posting your answer, you agree to the privacy policy and terms of service.

Browse other questions tagged or ask your own question.