Related papers: Exabel's Factor Model
A new framework for asset pricing based on modelling the information available to market participants is presented. Each asset is characterised by the cash flows it generates. Each cash flow is expressed as a function of one or more…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
We study market-to-book ratios of stocks in the context of Stochastic Portfolio Theory. Functionally generated portfolios that depend on auxiliary economic variables other than relative capitalizations ("sizes") are developed in two ways,…
The paper discusses capital allocation using the Euler formula and focuses on the risk measures Value-at-Risk (VaR) and Expected shortfall (ES). Some new results connected to this capital allocation is known. Two examples illustrate that…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
We study factor models augmented by observed covariates that have explanatory powers on the unknown factors. In financial factor models, the unknown factors can be reasonably well explained by a few observable proxies, such as the…
We extend and test empirically the multifractal model of asset returns based on a multiplicative cascade of volatilities from large to small time scales. The multifractal description of asset fluctuations is generalized into a multivariate…
Estimating and assessing the risk of a large portfolio is an important topic in financial econometrics and risk management. The risk is often estimated by a substitution of a good estimator of the volatility matrix. However, the accuracy of…
Factor analysis is a way to characterize the relationships between many manifest variables in terms of a smaller number of latent variables (i.e., factors). Particularly, in exploratory factor analysis (EFA), researchers consider various…
We introduce a new factor model for log volatilities that performs dimensionality reduction and considers contributions globally through the market, and locally through cluster structure and their interactions. We do not assume a-priori the…
We consider a conditional factor model for a multivariate portfolio of United States equities in the context of analysing a statistical arbitrage trading strategy. A state space framework underlies the factor model whereby asset returns are…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
In this paper, We propose a new style panel data factor stochastic volatility model with observable factors and unobservable factors based on the multivariate stochastic volatility model, which is mainly composed of three parts, such as the…
Large-scale matrix data has been widely discovered and continuously studied in various fields recently. Considering the multi-level factor structure and utilizing the matrix structure, we propose a multilevel matrix factor model with both…
We give a complete algorithm and source code for constructing general multifactor risk models (for equities) via any combination of style factors, principal components (betas) and/or industry factors. For short horizons we employ the…
This paper introduces the method of composite quantile factor model for factor analysis in high-dimensional panel data. We propose to estimate the factors and factor loadings across multiple quantiles of the data, allowing the estimates to…
Multimodal data, where different types of data are collected from the same subjects, are fast emerging in a large variety of scientific applications. Factor analysis is commonly used in integrative analysis of multimodal data, and is…
The scaling properties of the time series of asset prices and trading volumes of stock markets are analysed. It is shown that similarly to the asset prices, the trading volume data obey multi-scaling length-distribution of low-variability…
We propose an estimation methodology for a semiparametric quantile factor panel model. We provide tools for inference that are robust to the existence of moments and to the form of weak cross-sectional dependence in the idiosyncratic error…
We build a simple diagnostic criterion for approximate factor structure in large cross-sectional equity datasets. Given a model for asset returns with observable factors, the criterion checks whether the error terms are weakly…