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Factor Models of Asset Returns


Gregory Connor


London School of Economics & Political Science (LSE) - Department of Accounting and Finance

Robert A. Korajczyk


Northwestern University - Kellogg School of Management
May 27, 2009

ENCYCLOPEDIA OF QUANTITATIVE FINANCE, Rama Cont, ed., Chicester: Wiley, 2010.

Abstract:     
Factor models of security returns decompose the random return on each of a cross-section of assets into pervasive components, affecting almost all assets, and a diversifiable component. We describe four alternative approaches to factor models of asset returns. We also discuss issues related to estimating factor models and testing for the appropriate number of factors.

Number of Pages in PDF File: 10

Keywords: Factor Models, Principal Components, Factor Analysis, Macroeconomic Factors

JEL Classification: G12, C33

Accepted Paper Series


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Date posted: October 26, 2007 ; Last revised: November 17, 2011

Suggested Citation

Connor, Gregory and Korajczyk, Robert A., Factor Models of Asset Returns (May 27, 2009). ENCYCLOPEDIA OF QUANTITATIVE FINANCE, Rama Cont, ed., Chicester: Wiley, 2010.. Available at SSRN: http://ssrn.com/abstract=1024709

Contact Information

Gregory Connor
London School of Economics & Political Science (LSE) - Department of Accounting and Finance ( email )
Houghton Street
London WC2A 2AE
United Kingdom
+44 702 955-6407 (Phone)
+44 702 955-7420 (Fax)
Robert A. Korajczyk (Contact Author)
Northwestern University - Kellogg School of Management ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8336 (Phone)
847-491-5719 (Fax)
Feedback to SSRN (Beta)


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