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Financial factors selection with knockoffs: Fund replication, explanatory and prediction networks

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  • Challet, Damien
  • Bongiorno, Christian
  • Pelletier, Guillaume

Abstract

We apply the knockoff procedure to factor selection in finance. By building fake but realistic factors, this procedure makes it possible to control the fraction of false discovery in a given set of factors without resorting to p-values. To show its versatility, we apply it to fund replication and to the inference of explanatory and prediction networks.

Suggested Citation

  • Challet, Damien & Bongiorno, Christian & Pelletier, Guillaume, 2021. "Financial factors selection with knockoffs: Fund replication, explanatory and prediction networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 580(C).
    • Handle: RePEc:eee:phsmap:v:580:y:2021:i:c:s0378437121003782
    DOI: 10.1016/j.physa.2021.126105
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    References listed on IDEAS

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