covarianceMF: Covariance Matrix Estimate

In braverock/PortfolioAnalytics: Portfolio Analysis, Including Numerical Methods for Optimization of Portfolios

Covariance Matrix Estimate

Description

Estimate covariance matrix using a statistical factor model

Usage

covarianceMF(beta, stockM2, factorM2)

Arguments

beta	(N x k) matrix of factor loadings (i.e. the betas) from a statistical factor model
stockM2	vector of length N of the variance (2nd moment) of the model residuals (i.e. idiosyncratic variance of the stock)
factorM2	(k x k) matrix of the covariance (2nd moment) of the factor realizations from a statistical factor model

Details

This function estimates an (N x N) covariance matrix from a statistical factor model with k factors, where N is the number of assets.

Value

(N x N) covariance matrix

braverock/PortfolioAnalytics documentation built on April 18, 2024, 4:09 a.m.