Positive Portfolio Factors
AbstractWe use an iterative relocation algorithm to identify factors in common stock returns. The benefit of the approach is that factors are portfolios of assets with non-negative weights. As a result, they are readily interpretable in terms of the characteristics of the underlying securities. The positive portfolio factors have comparatively high explanatory power in sample and out of sample. We find evidence of a size factor and factors identified with certain industries. Factors extracted from the mutual fund universe perform marginally better than factors from the universe of equities.
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Bibliographic InfoPaper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm27.
Date of creation: 05 Mar 2004
Date of revision:
Other versions of this item:
- Stephen Brown & William Goetzmann & Mark Grinblatt, 1998. "Positive Portfolio Factors," Yale School of Management Working Papers ysm87, Yale School of Management, revised 01 Apr 2008.
- Stephen J. Brown & William N. Goetzmann & Mark Grinblatt, 1998. "Positive Portfolio Factors," NBER Working Papers 6412, National Bureau of Economic Research, Inc.
- NEP-ALL-2004-03-22 (All new papers)
- NEP-DEV-2004-03-22 (Development)
- NEP-FIN-2004-03-22 (Finance)
- NEP-FMK-2004-03-22 (Financial Markets)
- NEP-RMG-2004-03-22 (Risk Management)
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