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Statistical Risk Models

Listed author(s):
  • Zura Kakushadze
  • Willie Yu
Registered author(s):

    We give complete algorithms and source code for constructing statistical risk models, including methods for fixing the number of risk factors. One such method is based on eRank (effective rank) and yields results similar to (and further validates) the method set forth in an earlier paper by one of us. We also give a complete algorithm and source code for computing eigenvectors and eigenvalues of a sample covariance matrix which requires i) no costly iterations and ii) the number of operations linear in the number of returns. The presentation is intended to be pedagogical and oriented toward practical applications.

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    File URL: http://arxiv.org/pdf/1602.08070
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    Paper provided by arXiv.org in its series Papers with number 1602.08070.

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    Date of creation: Feb 2016
    Date of revision: Jan 2017
    Publication status: Published in The Journal of Investment Strategies 6(2) (2017) 1-40
    Handle: RePEc:arx:papers:1602.08070
    Contact details of provider: Web page: http://arxiv.org/

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