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Technically, say you have $K\gg X$ stocks and $X$ factors. Your (daily) returns can be written as $$dR=\frac{dS}{S}=\mu\,dt + F\,dW$$ where $\mu$ is a $K\times 1$ vector of expected returns (it is not very important since it is deterministic and will play no role in the computation of the covariance) $F$ is a $K\times X$ matrix of loadings of returns on ...

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