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How to build a factor model?

1. Determine Factors Economically, the use of factor models can be either motivated using the ICAPM or the APT. Although there are some theoretical differences between the model, for empirical and ...
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• 13.3k
Accepted

Hansen and Jagannathan distance

It would be easier to answer if you tell us where that equation came from (there are many ways of deriving the HJ distance) - in any case the numerator of your equation should be the expected return ...
• 6,810
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How to do Fama French (1993) cross sectional regressions? A few questions

You say: At this point I don't really get any further, as I am unsure about which "cross section" is being talked about here. Since I have created 25 portfolios, I can only have all in all ...
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Filtering out AR(1) effects before using stochastic volatility model

Even though it's a straightforward extension, it took me a while (a year? yikes!); but now you can easily incorporate Bayesian ar(1) (or more generally, Bayesian regression) in joint estimation by ...

CAPM Calculations

The question above looks somewhat confused. Where's the error term? A recipe for a standard calculation It's customary to work with monthly returns. For each portfolio $i$, calculate monthly ...
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Is my data fittet to be significant?

The question you ask is in fact about what people in machine learning call overfitting: the more you choose your "metaparameters" to provide high returns on your sample of days the less you can trust ...
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