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

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  • Damien Challet

    (MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay)

  • Christian Bongiorno

    (MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec - Université Paris-Saclay)

  • Guillaume Pelletier

    (BNP-Paribas)

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. To show its versatility, we apply it to fund replication and to the inference of explanatory and prediction networks.

Suggested Citation

  • Damien Challet & Christian Bongiorno & Guillaume Pelletier, 2021. "Financial factors selection with knockoffs: fund replication, explanatory and prediction networks," Post-Print hal-03165842, HAL.
    • Handle: RePEc:hal:journl:hal-03165842
    DOI: 10.1016/j.physa.2021.126105
    Note: View the original document on HAL open archive server: https://centralesupelec.hal.science/hal-03165842
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    References listed on IDEAS

    as
    1. Christian Bongiorno & Damien Challet, 2021. "Covariance matrix filtering with bootstrapped hierarchies," PLOS ONE, Public Library of Science, vol. 16(1), pages 1-13, January.
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