PortfolioAnalytics (version 1.1.0)

statistical.factor.model: Statistical Factor Model

Description

Fit a statistical factor model using Principal Component Analysis (PCA)

Usage

statistical.factor.model(R, k = 1, ...)

Arguments

R

xts of asset returns

k

number of factors to use

additional arguments passed to prcomp

Value

#'

  • factor_loadings N x k matrix of factor loadings (i.e. betas)

  • factor_realizations m x k matrix of factor realizations

  • residuals m x N matrix of model residuals representing idiosyncratic risk factors

Where N is the number of assets, k is the number of factors, and m is the number of observations.

Details

The statistical factor model is fitted using prcomp. The factor loadings, factor realizations, and residuals are computed and returned given the number of factors used for the model.