mu_estim_fm: Expected Return Estimation with Factors
In antshi/auxPort: Auxiliary functions for portfolio optimization

Description Usage Arguments Details Value Examples

Computes the estimator of the expected return according to a factor model.

1	mu_estim_fm(data, rf, factors)

`data`	an nxp data matrix
`rf`	a numeric vector or double for the risk-free return
`factors`	an nxf data frame of factors, e.g. the Fama-French 5 Research Factors

The expected returns are calculated according to a factor model, estimated with an OLS regression. For a set of factors F, the expected returns for an n\times p data matrix X are defined as

\hat{μ}= \hat{B}'E[F],

where E[F]=\frac{1}{n}∑_{i=1}^{n}F_{i} and \hat{B} are the estimated beta coefficients from the linear regression.

a vector of expected returns

data(sp500_rets)
data(ff_factors)
sp_rets <- sp500_rets[,-1]
ff_factors <- ff_factors[,-1]
rf <- ff_factors[,ncol(ff_factors)]
ff_factors <- ff_factors[,-ncol(ff_factors)]

mu_sample <- mu_estim_fm(sp_rets, rf, ff_factors)