Multi-Factor Models and Signal Processing Techniques: Survey and Examples

Abstract:     
This paper surveys the existing literature on the most widely-used factor models employed in the realm of financial asset pricing field. Through the concrete application of evaluating risks in the hedge fund industry, this paper demonstrates that signal processing techniques are an interesting alternative to the selection of factors and can provide more efficient estimation procedures than the classical ones.

Number of Pages in PDF File: 12

Keywords: Factor models, Factor selection, model selection, Kalman filter, robust Kalman filter, Hedge Funds analysis, risk exposures

JEL Classification: C13, C21, C61

Accepted Paper Series