Tagged Questions
1
vote
0answers
130 views
How to use financial ratios in a factor model?
I am trying to understand how factor loadings in a general factor model are computed. For simplicity sake, lets assume a simple model:
$$
R = B \times F + \epsilon
$$
$$
R = N \times 1
$$
$$
B = N ...
2
votes
1answer
94 views
Combining covariances?
Consider an economy with assets with return processes $A$, $B$, $C$, $D$. Consider a weighted index with return process $I=aA + bB + cC + dD$ where $a,b,c,d$ are coefficients, and $a+b+c+d = 1$.
...
8
votes
1answer
1k views
Which approach to estimating fundamental factor models is better, cross-sectional (unobservable) factors or time-series (observable) factors?
There are many approaches to estimating fundamental factor equity models. I would like to focus on two traditional methods:
The time-series regression approach of Fama and French. Factors are ...
