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.

=FACTORANALYSIS(whichStat, y, x, isStepwise)

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$R^2$ 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

83KB

FACTORANALYSIS.xlsx