PT  - JOURNAL ARTICLE
AU  - Robert F. Engle
AU  - Sergio M. Focardi
AU  - Frank J. Fabozzi
ED  - Mack, Barbara J.
TI  - Practical Applications of Issues in Applying Financial Econometrics to Factor-Based Modeling in Investment Management
AID  - 10.3905/pa.2016.4.2.179
DP  - 2016 Oct 31
TA  - Practical Applications
PG  - 1--4
VI  - 4
IP  - 2
4099  - https://pm-research.com/content/4/2/1.14.short
4100  - https://pm-research.com/content/4/2/1.14.full
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.