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Positive Portfolio Factors

Stephen J. Brown
NYU Stern School of Business

William N. Goetzmann
Yale School of Management - International Center for Finance; National Bureau of Economic Research (NBER)

Mark Grinblatt
University of California, Los Angeles - Finance Area; Yale University - International Center for Finance; National Bureau of Economic Research (NBER)


January 9, 1997

Yale School of Management Working Paper No. F-57

Abstract:     
We use an iterative relocation algorithm to identify factors in common stock returns. The benefit of the approach is that factors are portfolios of assets with non-negative weights. As a result, they are readily interpretable in terms of the characteristics of the underlying securities. The positive portfolio factors have comparatively high explanatory power in sample and out of sample. We find evidence of a size factor and factors identified with certain industries. Factors extracted from the mutual fund universe perform marginally better than factors from the universe of equities.

JEL Classifications: G1

Working Paper Series

Date posted: April 23, 1998 ; Last revised: April 24, 2008

Suggested Citation

Brown, Stephen J., Goetzmann, William N. and Grinblatt, Mark, Positive Portfolio Factors (January 9, 1997). Yale School of Management Working Paper No. F-57. Available at SSRN: http://ssrn.com/abstract=79373 or doi:10.2139/ssrn.79373


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Contact Information

William N. Goetzmann (Contact Author)
Yale School of Management - International Center for Finance ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
203-432-5950 (Phone)
203-432-8931 (Fax)
HOME PAGE: http://viking.som.yale.edu
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Stephen J. Brown
NYU Stern School of Business ( email )
Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0306 (Phone)
212-995-4233 (Fax)
Mark Grinblatt
University of California, Los Angeles - Finance Area ( email )
Los Angeles, CA 90095-1481
United States
310-825-1098 (Phone)
310-206-5455 (Fax)
Yale University - International Center for Finance
Box 208200
New Haven, CT 06520-8200
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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