RT Journal Article SR Electronic T1 Practical Applications of Issues in Applying Financial Econometrics to Factor-Based Modeling in Investment Management JF Practical Applications FD Institutional Investor Journals SP 1 OP 4 DO 10.3905/pa.2016.4.2.179 VO 4 IS 2 A1 Robert F. Engle A1 Sergio M. Focardi A1 Frank J. Fabozzi A1 Barbara J. Mack YR 2016 UL https://pm-research.com/content/4/2/1.14.abstract AB 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.