TY - JOUR T1 - Practical Applications of Issues in Applying Financial Econometrics to Factor-Based Modeling in Investment Management JF - Practical Applications SP - 1 LP - 4 DO - 10.3905/pa.2016.4.2.179 VL - 4 IS - 2 AU - Robert F. Engle AU - Sergio M. Focardi AU - Frank J. Fabozzi A2 - Mack, Barbara J. Y1 - 2016/10/31 UR - https://pm-research.com/content/4/2/1.14.abstract N2 - Issues in Applying Financial Econometrics to Factor-Based Modeling in Investment Management Robert F Engle Sergio M Focardi Frank J Fabozzi Factor models can be powerful tools for the management of trading strategies, portfolio management and risk control, but implementation can be tricky.In Issues in Applying Financial Econometrics to Factor-Based Modeling in Investment Management , authors Robert Engle ( NYU Stern School of Business ), Sergio Focardi ( Pôle Universitaire Léonard De Vinci ) and Frank Fabozzi ( EDHEC ) provide a practical approach for investors who want to avoid the most common pitfalls of factor-based modeling—especially overfitting and the curse of dimensionality.The authors identify three major challenges: The appropriate choice of type and quantity of factors, the issue of under- and overfitting, and biased backtesting results. ER -