Positive Portfolio Factors

Stephen Brown (), William Goetzmann and Mark Grinblatt

Yale School of Management Working Papers from Yale School of Management

Abstract: We use an iterative relocation algorithm to identify factors in common stock returns. The benefit of the approach is that factors are portfolios of assets with non-negative weights. As a result, they are readily interpretable in terms of the characteristics of the underlying securities. The positive portfolio factors have comparatively high explanatory power in sample and out of sample. We find evidence of a size factor and factors identified with certain industries. Factors extracted from the mutual fund universe perform marginally better than factors from the universe of equities.

Date: 2004-03-05
New Economics Papers: this item is included in nep-dev, nep-fin, nep-fmk and nep-rmg
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Related works:
Working Paper: Positive Portfolio Factors (2008)
Working Paper: Positive Portfolio Factors (2008)
Working Paper: Positive Portfolio Factors (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:ysm:somwrk:ysm27

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