FACTORANALYSIS
Evaluate your assets, managers, and portfolios against factors (economic variables, signals, risk models). Decompose risk and return of your instruments using multi-factor or stepwise regressions.
Description
Multi-factor and stepwise regression model to identify the sensitivity of an asset, manager, or portfolio's return against a set of factors.
Syntax
The following describes the function signature for use in Microsoft Excel's formula bar.
Input(s)
| Argument | Description |
|---|---|
whichStat | Required. String to specify statistic to return, use one of the following options: "beta" "intercept" "rsquared" "tstat" "tintercept" "residualvariance" "totalvariance" "riskdecomposition" "returndecomposition" |
y | Required. Time series or matrix of dependent variables. This is typically the time series of your portfolios, managers, or asset class returns. |
x | Required. Time series or matrix of independent variables. This is typically a set of economic variables or factors. |
isStepwise | Optional. Logical (TRUE or FALSE). If TRUE then a stepwise regression algorithm is used, if the argument is not specified it defaults to FALSE. |
Output(s)
The function's output will vary depending on the specification of the whichStat argument. The following table will describe the corresponding output result. For M-dependent variables (y) and N-independent variables (x)
| whichStat | Output |
|---|---|
beta | NxM regression coefficients. |
intercept | 1xN intercept values. |
rsquared | 1xN coefficient of determination, or values. |
tstat | MxN t-statistics. |
tintercept | 1xN t-statistic of the intercepts. |
residualvariance | 1xN residual variance. |
totalvariance | Total variance of the regression. |
riskdecomposition | MxN risk decomposition of y as a function of x and residuals. |
returndecomposition | MxN return decomposition of y as a function of x and intercepts. |
Example
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