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Factor Identification and Modeling

Identification of major risk factors have, and will be one of the safest ways to navigate in a complex environment, such as capital markets. Their joint behavior and their impact on traded assets require pragmatic observation with permanent update.

This section is a selection of academic articles on factor models, factor selection and construction.

Factor Primer

Combining Factor Risks in Risk Measurement Schemes

Authors: Alexander Cherny, Raphael Douady, Stanislav Molchanov, Riskdata
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Stepwise Replication

An enhanced version of this algorithm is used in Riskdata's replication feature.

Honest Confidence Intervals for the Error Variance in Stepwise Regression

Authors: Dean P. Foster, Robert A. Stine
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Model Selection: Stepwise Regression

Authors: Laura Simon
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Variable Selection in Multivariable Regression Using SAS/IML

Authors: Ali A. Al-Subaihi
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Factor Selection

Best Practices in Exploratory Factor Analysis: Four Recommendations for Getting the Most From Your Analysis

Authors: Anna B. Costello, Jason W. Osborne
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Revisiting Data Mining: "Hunting" with or without a License

Authors: Aris Spanos
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Statistical Screening, Selection, and Multiple Comparison Procedures in Computer Simulation

Authors: David Goldsman, Barry L. Nelson
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A Matching Pursuit Full Search Algorithm for Image Approximation

Authors: Rosa M. Figueras i Ventura, Oscar Divorra Escoda and Pierre Vandergheynst
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Principal Component Analysis

Independent Component Analysis: Algorithms and Applications

Authors: Aapo Hyvärinen, Erkki Oja
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Financial Applications of Random Matrix Theory: Old Laces and New Pieces

Authors: Marc Potters, Jean-Philippe Bouchaud, Laurent Laloux
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Prediction by Supervised Principal Components

Authors: Eric Bair, Trevor Hastie, Derabshis Paul, Robert Tibshirani
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Factor Analysis and Independent Component Analysis in Presence of High Idiosyncratic Risks

Authors: Thierry Vessereau
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Factor Analysis

Authors: Richard B. Darlington
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“This is a challenging and exciting time. Risk managers and senior executives should be seeking more from risk management. Their role needs to evolve as financial institutions increasingly recognize the opportunities and value of a better understanding of risk.”

Phil Rivett
PricewaterhouseCoopers UK