Macro Factor-Mimicking Portfolios

27 Pages Posted: 2 May 2019 Last revised: 12 Nov 2022

Date Written: November 9, 2022

Abstract

The estimation of risk factors and their replication through mimicking portfolios are of critical importance for academics and practitioners in finance. Starting from a general optimization framework that encompasses existing factor-mimicking approaches, we incorporate machine learning estimation improvements to mitigate the impact of estimation errors in the observed factors. The empirical application for the primary major macroeconomic factors (growth and inflation) over the period 1974-2022 proves the superiority of the approach.

Keywords: Macroeconomics, factor-mimicking portfolios, portfolio optimization, machine learning

JEL Classification: G11, D81, C60

Suggested Citation

Jurczenko, Emmanuel and Teiletche, Jerome, Macro Factor-Mimicking Portfolios (November 9, 2022). Available at SSRN: https://ssrn.com/abstract=3363598 or http://dx.doi.org/10.2139/ssrn.3363598

Emmanuel Jurczenko

EDHEC Business School ( email )

393 Promenades des Anglais
Nice, 06200
France
+330615174102 (Phone)

Jerome Teiletche (Contact Author)

Unigestion ( email )

8c, avenue de Champel CP 387
CP 387
Genève 12, CH 1211
Switzerland

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