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Unformatted text preview: Factor Portfolios Information coeﬃcient: ICt ,t +h = Corr (ft , Rt +h ) stdev (ICt ) - strategy risk of a factor Main objective: Mimic the return behavior of a factor and minimize residual risk. Holdings for factor portfolios is given by the rows of (B Σ−1 B )−1 B Σ−1 ; assume Σ is diagonal representing speciﬁc asset risk. ...
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This note was uploaded on 10/16/2010 for the course STAT 244 taught by Professor Dr.velu during the Summer '10 term at Stanford.
- Summer '10