IDEAS home Printed from https://ideas.repec.org/h/eme/aecozz/s0731-905320140000034009.html
   My bibliography  Save this book chapter

Factor Selection in Dynamic Hedge Fund Replication Models: A Bayesian Approach

In: Bayesian Model Comparison

Author

Listed:
  • Guillaume Weisang

Abstract

In this paper, I propose an algorithm combining adaptive sampling and Reversible Jump MCMC to deal with the problem of variable selection in time-varying linear model. These types of model arise naturally in financial application as illustrated by a motivational example. The methodology proposed here, dubbed adaptive reversible jump variable selection, differs from typical approaches by avoiding estimation of the factors and the difficulties stemming from the presence of the documented single factor bias. Illustrated by several simulated examples, the algorithm is shown to select the appropriate variables among a large set of candidates.

Suggested Citation

  • Guillaume Weisang, 2014. "Factor Selection in Dynamic Hedge Fund Replication Models: A Bayesian Approach," Advances in Econometrics, in: Bayesian Model Comparison, volume 34, pages 181-222, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:aecozz:s0731-905320140000034009
    DOI: 10.1108/S0731-905320140000034009
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/S0731-905320140000034009/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: no
    File URL: https://www.emerald.com/insight/content/doi/10.1108/S0731-905320140000034009/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: no
    File URL: https://www.emerald.com/insight/content/doi/10.1108/S0731-905320140000034009/full/epub?utm_source=repec&utm_medium=feed&utm_campaign=repec&title=10.1108/S0731-905320140000034009
    Download Restriction: no
    File URL: https://libkey.io/10.1108/S0731-905320140000034009?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    Tracking problem; hedge fund replication; alternative beta; Kalman filter; factor selection; model selection; C1; C11; C32; C52; G11;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:aecozz:s0731-905320140000034009. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.