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Econometric model that have the purpose to measure the effect of different risk measures on portfolio asset returns.

The factor models are econometric-based models that aims to measures the effect of different risk measures on portfolio asset returns.

Such models are of three kinds:

  • Macroeconomic factor models: models that attempt to measure the effect of macroeconomic variables on asset returns using macroeconomic variables as the change in the interest rates, unemployment rate, inflation rate,...;
  • Statistical factor models: models that attempt to explain the risks particular to an investment;
  • Fundamental factor models: models that attempt to measure the risks relative to a particular industry or market that might influence the asset portfolio returns;
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