Multifactor Attribution for long-only investors
This paper provides a comparative analysis of techniques used to improve the quality of multifactor attributions on constrained long-only portfolios. Our research includes a Weighted Least Squares (WLS) approach, the derivation of constrained factor mimicking portfolios as well as a time series- and a non-linear adjustment approach. Based on the multiperiod attribution of a representative portfolio over the timeframe from 1997 to 2019, we find that significant improvements can be achieved by applying both adjustment methods since these better align the attribution with the constrained investment process. In addition, using a shrinkage estimator in the WLS approach enhances the widely used market cap weighting scheme by adding further statistical robustness.
|Keywords||Performance Attribution, Factor Models, Factor Mimicking Portfolios|
|Thesis Advisor||Kole, H.J.W.G.|
Tran, R.T. (2020, March 17). Multifactor Attribution for long-only investors. Econometrie. Retrieved from http://hdl.handle.net/2105/51679