about estimation risk in FFMs in high dimensions. We investigate whether recent linear and non-linear shrinkage methods help … to reduce the estimation risk in the asset return covariance matrix. Our findings indicate that modest improvements are …We investigate covariance matrix estimation in vast-dimensional spaces of 1,500 up to 2,000 stocks using fundamental …

risk of the index to be replicated. Our selection methodology is consistent as the sample size and the number of assets …

using historical data on European financial stocks that forecasts portfolio Value at Risk (VaR) and Expected Shortfall (ES). …

strategy in a dynamic setting). We also use a shrinkage estimation method based on a quasi-likelihood function to regularize … the optimal Sharpe ratio of the TV-MVP and the sharp risk consistency. Moreover, we offer a test of constant covariance … proposed TV-MVP has superior performance in estimation accuracy and out-of-sample Sharpe ratio, among other popular …

factor models and use it in risk assessments. We consider a class of approximate factor models in which the candidate … occurrences of the uncommon components are rare, we develop an estimation procedure to simultaneously disentangle and estimate the … priced for expected returns of Fama and French 100 size and book-to-market ratio portfolios. We find that while the risk from …

Fama-French portfolios for the US markets and report that the risk factors cannot definitively identify assets with higher … average returns though they may help in identifying those with lower average risk. Further, using both Fama-French portfolios …

implementation of the ICAPM, which captures market risk and intertemporal risk (i.e., changes in long-term expected returns and … volatility). We build our intertemporal risk factors as mimicking portfolios for changes in dividend yield and realized … volatility and demonstrate that, ex-post, they capture news to long-term expected returns and volatility. Our estimated risk …

financial variables changes the model dynamics and delivers price responses which are more in line with economic theory. A …

Latent factor model estimation typically relies on either using domain knowledge to manually pick several observed … estimation robust, flexible, and statistically more accurate. As a bonus, the number of factors is also allowed to grow. At the …