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)
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)
beta
NxM regression coefficients.
intercept
1xN intercept values.
rsquared
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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