| Original language | English (US) |
|---|---|
| Title of host publication | Encyclopedia of Quantitative Finance |
| Editors | Rama Cont |
| Publisher | John Wiley & Sons, Inc. |
| ISBN (Print) | 978047057568 |
| DOIs | |
| State | Published - 2010 |
Abstract
Factor models of security returns decompose the random return on each of a cross-section of assets into pervasive components, affecting almost all assets, and a diversifiable component. We describe four alternative approaches to factor modeling of asset returns. We also discuss issues related to estimating factor models and testing for the appropriate number of factors.