Market Risk Analysis Volume II: Practical Financial Econometrics

Contents

List of Figures

List of Tables

List of Examples

Foreword

Preface to Volume II

II.1 Factor Models

II.1.1 Introduction

II.1.2 Single Factor Models

II.1.2.1 Single Index Model

II.1.2.2 Estimating Portfolio Characteristics using OLS

II.1.2.3 Estimating Portfolio Risk using EWMA

II.1.2.4 Relationship between Beta, Correlation and Relative Volatility

II.1.2.5 Risk Decomposition in a Single Factor Model

II.1.3 Multi-Factor Models

II.1.3.1 Multi-factor Models of Asset or Portfolio Returns

II.1.3.2 Style Attribution Analysis

II.1.3.3 General Formulation of Multi-factor Model

II.1.3.4 Multi-factor Models of International Portfolios

II.1.4 Case Study: Estimation of Fundamental Factor Models

II.1.4.1 Estimating Systematic Risk for a Portfolio of US Stocks

II.1.4.2 Multicollinearity: A Problem with Fundamental Factor Models

II.1.4.3 Estimating Fundamental Factor Models by Orthogonal Regression

II.1.5 Analysis of Barra Model

II.1.5.1 Risk Indices, Descriptors and Fundamental Betas

II.1.5.2 Model Specification and Risk Decomposition

II.1.6 Tracking Error and Active Risk

II.1.6.1 Ex Post versus Ex Ante Measurement of Risk and Return

II.1.6.2 Definition of Active Returns

II.1.6.3 Definition of Active Weights

II.1.6.4 Ex Post Tracking Error

II.1.6.5 Ex Post Mean-Adjusted Tracking Error

II.1.6.6 Ex Ante Tracking Error

II.1.6.7 Ex Ante Mean-Adjusted Tracking Error

II.1.6.8 Clarification of the Definition of Active Risk

II.1.7 Summary and Conclusions

II.2 Principal Component Analysis

II.2.1 ...