Financial factors selection with knockoffs: Fund replication, explanatory and prediction networks

Damien Challet, Christian Bongiorno and Guillaume Pelletier

Physica A: Statistical Mechanics and its Applications, 2021, vol. 580, issue C

Abstract: We apply the knockoff procedure to factor selection in finance. By building fake but realistic factors, this procedure makes it possible to control the fraction of false discovery in a given set of factors without resorting to p-values. To show its versatility, we apply it to fund replication and to the inference of explanatory and prediction networks.

Keywords: Factors; Factor selection; Clustering; Lead–lag; Prediction; Backtest (search for similar items in EconPapers)
Date: 2021
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Related works:
Working Paper: Financial factors selection with knockoffs: fund replication, explanatory and prediction networks (2021)
Working Paper: Financial factors selection with knockoffs: fund replication, explanatory and prediction networks (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:580:y:2021:i:c:s0378437121003782

DOI: 10.1016/j.physa.2021.126105

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