We refine the approximate factor model of asset returns by distinguishing between natural rate factors, whose sum of squared factor betas grow at the same rate as the number of assets, and semi-strong factors, whose sum of squared factor betas grow to infinity, but at a slower rate. We...

Main description: Portfolio risk forecasting has been and continues to be an active research field for both academics and practitioners. Almost all institutional investment management firms use quantitative models for their portfolio forecasting, and researchers have explored models' econometric...

Portfolio risk forecasting has been and continues to be an active research field for both academics and practitioners. Almost all institutional investment management firms use quantitative models for their portfolio forecasting, and researchers have explored models' econometric foundations,...

We use an asymptotic principal Components technique to estimate pervasive factors influencing asset returns and to test the restrictions imposed by static and intertemporal equilibrium versions of the arbitrage pricing theory (APT) on a multivariate regression model. The empirical techniques...