Techniques for modeling and analyzing several variables, when the focus is on the relationship between a dependent variable and one or more independent variables.

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623 views

How to compute portfolio weights from multivariate regression results?

Assuming that I performed a multivariate regression and I found a set of $k$ coefficients $\alpha_1, ..., \alpha_k$ for each of the factors $F_1, ... F_k$. I have then computed the following ...
6
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4answers
1k views

Using rolling returns in a multivariate linear regression?

I am trying to use fundamental factors such as PE, BV, & CFO in a multivariate linear regression with the response variable being the rolling 1 month returns. But this approach seems flawed as the ...
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1answer
457 views

Trading Strategies and Portfolio Constructions based on Cross Sectional Regression? [closed]

I often see trading strategies and portfolio construction that are based on cross-sectional regression. For example, I often see regressing some numbers against some factors. I was wondering how ...
6
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1answer
944 views

What are the steps to perform properly a risk factor analysis on a portfolio?

I have been asked to perform a factor analysis on a given portfolio, assume it's a Swiss portfolio in CHF. First step, I chose which factors I would like to see in my analysis. The first factors I ...
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1answer
590 views

How to calculate the weight of the stocks using the linear regression?

I do a simple example with the follow three series(stocks prices): ...
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1answer
667 views

How to run an asset replication regression?

I am doing extensive research on portfolio replication and was hoping to get some help with some problems I am encountering. I am running a regression between 2 assets that I believe replicate ...
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3answers
313 views

How to improve the consistency of explained variance statistics in a linear equity model?

I have an intraday equity returns linear model that, overall, shows good values in terms of $R^2$, p-value and other explained variance statistics. Around 70% of the stocks show consistent R-squared ...
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1answer
395 views

Linear regression and assets direction prediction

I have the following asset returns Y and the predictions for the same periods Y': Y = { 10, 200, -1000, -1, -7 } Y' = { 1, 2, -3, -4, -5 } The OLR R-squared for ...
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0answers
320 views

How to balance two Forex crosses correctly to do a linear regression?

I have two cross and an account in EUR: EUR/USD GBP/USD I would like to do a balanced linear regression using R. With "balanced" I mean that I would like to normalize it by calculating the ...
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1answer
3k 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 ...
7
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1answer
810 views

Expected return from a multiple linear regression?

How can I compute the predicted return from a linear regression that includes a number of different terms. For instance, suppose my equation is: $r_{future} = \alpha + \beta_1 r_{history} + \beta_2 ...
6
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2answers
413 views

Efficiency vs. Robustness - To use a constant or not in single factor time-series regression?

Arbitrage pricing theory states that expected returns for a security are linear combination of exposures to risk factors and the returns on these risk factors. Betas, or the exposures of the security ...
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5answers
4k views

Using linear regression on (lagged) returns of one stock to predict returns of another

Suppose I want to build a linear regression to see if returns of one stock can predict returns of another. For example, let's say I want to see if the VIX return on day X is predictive of the S&P ...
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4answers
2k views

How to perform risk factor calculation?

I am studying Arbitrage Pricing Theory (APT) and I have a question about calculating factor exposures. Assume: \begin{equation} r = \beta_1r_1 + \beta_2r_2 + ... + \beta_kr_k + r_e \end{equation} ...
7
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1answer
3k views

Time Series Regression with Overlapping Data

I am seeing a regression model which is regressing Year-on-Year stock index returns on lagged (12 months) Year-on-Year returns of the same stock index, credit spread (difference between monthly mean ...
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1answer
2k views

How do I reproduce the cross-sectional regression in “Intraday Patterns in the Cross-section of Stock Returns”?

Recently I was trying to reproduce the results of "Intraday Patterns in the Cross-section of Stock Returns". The authors used cross-sectional regression to determine which intraday lags have ...
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1answer
1k views

What is a persistent variable?

What is a persistent variable in the context of regression analysis? For example, dividend to price ratio (D/P) is considered to be persistent variable when used to model future returns (Stambaugh ...