Identification of the Factors

Pierre Brugière
Additional contact information
Pierre Brugière: University Paris Dauphine-PSL

Chapter Chapter 9 in Quantitative Portfolio Management, 2020, pp 141-154 from Springer

Abstract: Abstract In this chapter we use Principal Component AnalysisPrincipal component analysis to study the returns of a set of risky assets and to identify the most relevant factors explaining their variations. The residual risks will be uncorrelated with the factors by construction, and therefore the general conditions of a factor model are satisfied. The number of factors chosen will be based on the percentage of the total variance they explain. If a large portion of the total variance is explained then for most stocks the residual risks will be small.

Date: 2020
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sptchp:978-3-030-37740-3_9

Ordering information: This item can be ordered from
http://www.springer.com/9783030377403

DOI: 10.1007/978-3-030-37740-3_9

Access Statistics for this chapter

More chapters in Springer Texts in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().