Questions tagged [regression]

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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14 views

ceresPlots.default(fit_2) : No plots specified [closed]

Whenever, I am trying to plot graphs through the function ceresPlots(), it's showing an error which is something like this. ceresPlots(fit_2) Error in ceresPlots.default(fit_2) : No plots specified ...
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73 views

Regressing changes in yield/yield curve

If I'm regressing changes in individual points along a yield curve and measures of changes in level/slope/curvature of that yield curve against the returns of some random variable then do I want to ...
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77 views

Best method to determine future success or to determine best linearity?

Long time viewer, but first time poster, so excuse me if i'm in the wrong place please. Anyway, I am working on a project that is pretty interesting. Through data mining, I am able to gather a ton of ...
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36 views

modeling example for price changes using HFT data

In Rue S. Tsay’s Time Series book, a decomposition method is described for analyzing price changes using HFT trade data. A change is modeled using the following variables, A indicates price change ...
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95 views

Fair Value Regression Methods

Recently we had an invited talk at our university (I'm Ph.D. student in ML department, so I'm sorry if my question is stupid, since I do not have quantitative finance background), where one researcher ...
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29 views

Creating a single data set using daily trades

I try to model the price change of a stock using the daily trades. I have 3-months of daily trades data of an exchange. I want to create a single data set using this data by combining each days' data. ...
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24 views

EGARCH and GARCH effects with White Noise squared residuals

I'm asked to model a series which it's returns are white noise and after adjusting a regression like $r_t=c$ and looking it's squared residuals (white noise too) I'm asked to adjust a GARCH and EGARCH ...
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105 views

Fama McBeth - Significance

The very last step of the Fama McBeth procedure is to aggregate the estimated regression coefficients by taking their mean. The mean is then the estimate for the "overall" regression ...
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88 views

Difference between returns

I have a monthly time series of monthly returns for a specific factor that I'm investigating, the Quality factor QMJ as proposed by Asness et al. (https://www.aqr.com/Insights/Datasets/Quality-Minus-...
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Can you apply GARCH to ARIMAX models?

Is it possible to apply the idea of GARCH to time series models that include exogenous variables? For example, say I estimate a cash flow forecast model. Does it make sense to model the residuals by ...
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15 views

Identifying factor model shifts in different periods

Given a set of K independent variables X = (x1, x2, ..., xk) and a dependent variables y, I try to run the step-wise regression ...
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70 views

How often to tune the regularisation parameter in LASSO?

I'm trying to implement the following paper: Avellaneda & Lee (2010), Statistical Arbitrage in the US equities market. To build the strategy, the idea is to trade a stock and hedge using a basket ...
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86 views

Sigma squared times identity matrix in normality of errors

In OLS regression, we have the normality of the error terms $$\varepsilon \sim N(0,\sigma^2I_n)$$ I understand that we want to have a constant variance for homoscedastic errors, but why is $\sigma^2$ ...
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71 views

Minimizing the sum of squared errors in linear regression (proof/matrix notation)

I'd appreciate you helping me understanding the proof of minimizing the sum of squared errors in linear regression models using matrix notation. I'm trying to derive by minimizing the sum of squared ...
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47 views

transforming variables

I am would like to create a regression model with different variables however before using these variables in my regression model I would like to transform the variable in order to make it more ...
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38 views

The question is related to the regression analysis - stationarity testing

How to interpret different scenarios in ADF test. Scenarios: ADF Test: Type: None, Drift, Trend What exactly each of the types specify and when to use which 'type' during performing stationarity and ...
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32 views

Fama MacBeth regression over long time horizons

I have a question related to Fama MacBeth type regressions: I use total stock returns as the dependent variable and various variables (including market beta, size, valuation) as explanatory variables. ...
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19 views

basic cross sectional regression question for dummy variable

how does a cross sectional regression works if you have only 1 independent variables being a dummy variable-ratings. lets suppose building a proxy benchmark for similar rated company.
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39 views

How to measure the sensitivity of a fund to a set of indices?

I'm trying to understand how recently created funds work and ultimately derive a sort of a probability distribution for their future returns, by approximating them with indices and then using the ...
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49 views

Which features based on orderbook information could be relevant for price prediction?

I have some orderbook data, including 5 ask prices, 5 bid prices, amount of asks and bids for every price, and midprice which is equal to (best bid + best ask)/ 2. I would like to predict absolute ...
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58 views

Performance measurement

When I regress the excess performance of a portfolio on the MKT Factor using daily data. I get a Beta of 0.95 and an alpha of 0.00011 that I annualize *252 = 2.77% I know that the annualized return of ...
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79 views

Factor model for Gold has low adjusted R2

I am trying to build up a factor model for gold. To be able to identify the correct factors, I did a correlation analysis between a few factors vs gold and I integrated this analysis with what I saw ...
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49 views

Alpha and returns annualized

Basic question , but if I do a daily regression and get an alpha of 0.00004. Should the yearly alpha be : 0.00004 *100 *252 = 1.008% OR 0.00004 * 100 *365 = 1.46%. What is considered the yearly alpha ...
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47 views

How can the different r2 score of an AR(1) model on prices vs. returns be explained

This is maybe a silly question, but I want to understand. As far as I understand an AR(1) model, it is basically a linear regression model with the same but lagged variable, right? However I am ...
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73 views

Factor Model Regression Market Factor Statistically Insignificant After Adding Extra Factors

I am running a simple 4 factor model which includes the factors: Benchmark (Market - FortyConsumerSixtyHealthcare), SMB, HML and MOM. When I simply apply the regression to the portfolio returns and ...
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81 views

How can you use factor modelling to improve your current portfolio [closed]

Firstly let me apologise if this has been asked on on here before - I went through some of the factor modelling post on here but I've struggled to find the answers. I am new to the quant world and I ...
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93 views

Reintegrating Fractionally Differentiated Time Series Prediction

I am working on a supervised learning approach to Time Series Regression, and am currently investigating fractionall differentiation (optimizing the stationarity/information tradeoff) discussed ...
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40 views

Is there a noticeable difference in making scatter plots and regression models with tick-data or with candle data?

I am asking this question because I want to research some variables. An example is the RSI where the current RSI is updated every tick. This means that the value of the RSI is fluctuating a lot inside ...
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1answer
70 views

Low volatility in factor regression

Let's say we are working with the standard Fama-French 3 factor model and we want to add a low volatility factor. Is it alright to add a low volatility risk premium in a model such as the CAPM or FF3. ...
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58 views

What date to pick for regression on global stocks

Let's say I have a return of a stock in Japan that I wish to regress on the S&P 500 index using daily data for 1 year. Since the Japanese stock market has different holidays than the US, the dates ...
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1answer
64 views

does oversampling affect the correlation?

I have a dataset of monthly data. One column is my target variable and all the other are my feature. I have computed correlation between my target and all the other feature and then I made linear ...
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58 views

Choice of factor model based on correlation

I have a portfolio of assets. Each assets have been discretionally (based on investment manager experience) related to economic factors like (like exchange rate inflation spread etc). Now for each ...
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1answer
36 views

In your experience, when trying to predict something that occurs, do you model with a fixed time period?

Let's say you are building a simple model (like the classroom examples) of trying to predict, given past information, if the stock goes up or down in the future. One could, like in classroom examples, ...
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84 views

Adding more factors to Fama French Carhart 4 factor model

Does it make sense to add more factors such as Quality Minus Junk (QMJ) and Betting Against Beta (BAB) in the Fama-French-Carhart model? Also, if anyone can point me to an article it would be ...
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126 views

Should Fama-French coefficients be calculated with daily or monthly returns?

I noticed when I regress the return of a portfolio on the Fama French 3 factor model that the value and the statistical significance of the coefficients vary when I use daily versus monthly portfolio ...
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64 views

Global portfolio alpha

How does one compute the alpha of a global portfolio. Let's say we are using the Fama French 3 factor model and we have a portfolio of 50% US stocks and 50% German stocks. Should the regression be ...
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222 views

How to do Fama French (1993) cross sectional regressions? A few questions

I am still relatively new to asset pricing factor models and have a few questions about my current empirical study. I would be very pleased if you could help me. I have created a new factor which I ...
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31 views

What's the industry standard/typical way to model contango or futures spreads?

If you want to include futures spread either as a response or predictor, I would imagine you also need to include time to expiration somewhere in your model. What is the industry standard way to ...
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45 views

How do Hedge Funds account for returns from short selling?

I was going over my notes from an Asset Pricing module yesterday and came across something interesting I hadn't thought about in a while. It was how Hedge Funds can over inflate their performance by ...
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45 views

Constructing a replicating portfolio of a long-only strategy using long-short factors

Lets say I want to estimate a replicating portfolio by doing a linear regression between the returns of a long-only portfolio and several long-short factors like Fama-French 5-factor or Betting ...
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25 views

PanelOLS or simple OLS?

It is probably a silly question but please assume the following. I gather hedge funds returns and I want to do a regression against few dependent variables (FF factors, etc.). In essence, I get a ...
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19 views

Tradeoffs of using Loess regression to fit random walks

I am curious if anyone has had much experience attempting to predict random walks using Loess regression or a variant of local statistical methods.
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101 views

How to set up the dummy variable for OLS event study regression

I've been going back and forth with how I should work to find an event effect. would be so grateful for some clarification. I have daily time series of exchange rates for different countries ( 1 for ...
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1answer
36 views

How do you build a model with uncertain time range?

Let's say you want to test the hypothesis that given a signal reaches some threshold, some asset will have some return over the next period. Here we have two unknowns. One, the value of your ...
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75 views

understanding the linear constraint on a regression performance report

I am trying to understand a regression performance attribution. The problem the code solves is shown below. min 0.5 * x'Hx + f'x st. Ax <= b So I have n ...
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33 views

Existing research on fund performance contribution analysis?

Consider the following problem: You would like to understand how a particular Multi Asset Class fund is invested (ascertain the weights attributed to each asset class) You have at your disposal a ...
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33 views

Results of Fama french three factors model and Fama MacBeth cross sectional regression

I am doing research work on “Idiosyncratic volatility and stock return”. I have calculated Idiosyncratic volatility with the help of Fama french three factor model. IV is defined as the standard ...
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1answer
39 views

in-sample vs. out of sample conundrum

Lets say I for work with data from 2000-now in one sample (in-sample), and lets say that my out-of -sample will be from 2000 to 1950. I will then get some type of out-of-sample result. If i then run a ...
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230 views

Why use square root of companies market cap in the WLS matrix

When doing a regression based performance attribution I see that people normally use WLS. So that both our independent and dependent variables are multiplied by our WLS matrix, which is a diagonal ...
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Results of Fama MacBeth regression

I have run Fama MacBeth cross section regression of of Excess Return of stocks on Idiosyncratic volatility, the log of market capitalization, book to equity ratio and Beta. I'm getting all significant ...

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