Performance Attribution for Factor Investing

24 Pages Posted: 16 Sep 2019 Last revised: 3 May 2021

See all articles by Frederic Abergel

Frederic Abergel

BNP Paribas Asset Management; CentraleSupélec, Université Paris-Saclay

Thomas Heckel

BNP Paribas - BNP Paribas Asset Management

Date Written: March 31, 2021

Abstract

This note presents a novel approach to the performance analysis of
multi-factor investment strategies. Our main methodological contributions are threefold : first, the use of a cross-sectional projection of asset
returns onto the factors to form approximate portolio returns; second,
that of nonlinear, interaction terms between factors that faithfully reproduce the investment portfolio construction; third, a natural and intuitive
decomposition of the portfolio performance as the sum of factor contributions. The method is presented in details, and concrete applications to
multi-factor equity strategies are presented.

Keywords: factor investing, performance attribution, portfolio construction

Suggested Citation

Abergel, Frederic and Heckel, Thomas, Performance Attribution for Factor Investing (March 31, 2021). Available at SSRN: https://ssrn.com/abstract=3450392 or http://dx.doi.org/10.2139/ssrn.3450392

Frederic Abergel (Contact Author)

BNP Paribas Asset Management ( email )

Paris
France

CentraleSupélec, Université Paris-Saclay ( email )

Paris
France

HOME PAGE: http://www.mas.ecp.fr/fiQuant

Thomas Heckel

BNP Paribas - BNP Paribas Asset Management ( email )

Paris
France

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