116 reputation
3
bio website
location
age
visits member for 1 year, 10 months
seen yesterday

Jan
16
comment Why is Weighted Least Squares necessary in fundamental factor model?
@Richard I agree with you that the definition is rather vague, and it seems as if the $\beta$'s and the factors just swapped roles, but unfortunately my book doesn't give me a more rigorous definition.
Jan
16
comment Why is Weighted Least Squares necessary in fundamental factor model?
@Richard An example would be if you let the first elements of each $\beta$ vector be strongly negative and then let them be increasing so that the last values are strongly positive and the values in the middle are relatively close to $0$: that way you would 'force' the factors to represent the slope of the yield curve for instance (in case we see $R_{it}$ as the yield).
Jan
16
awarded  Editor
Jan
16
revised Why is Weighted Least Squares necessary in fundamental factor model?
added 3 characters in body
Jan
13
awarded  Student
Jan
13
asked Why is Weighted Least Squares necessary in fundamental factor model?
May
18
awarded  Supporter