Course description
Factor Modeling for Investment Management
Factor models and factor-based investing are changing the way institutional investment managers construct portfolios and analyze risk.
This hands-on program explores key techniques and practical challenges when working with factor models in investment management; as well as reviewing how factor models enable better portfolio risk assessments. Economic as well as statistical aspects will be covered in a balanced manner.
The course features practical applications of all concepts discussed, using Excel models with relevant real-world data.
The Course is For:
- Quantitative Analysts
- Risk Managers
- Portfolio Managers
- Investment Consultants
- Financial Economist
Prior Knowledge:
- Basic understanding of Modern Portfolio Theory (MPT) and statistics
- Good familiarity with Microsoft Excel
Upcoming start dates
Who should attend?
Learning Objectives:
- Understand quantitative approaches used in factor modeling today
- Develop basic factor models for equity, fixed income and multi-asset class portfolios
- Use factor models in performance & risk analysis as well as asset allocation
London Financial Studies is registered with CFA and GARP Institute as an Approved Provider of continuing education programs. GARP & CFA Institute members attending this course are eligible for CE/CPD credits.
Training content
Day One
Background
- Overview factor research and applications: from the CAPM to "Smart Beta"
- Factor models: fundamental, macroeconomic, statistical, and hybrid
- Commercial versus custom factor models
Statistical Foundations
- Linear regression models: assumptions, estimation, analytics (R^2, t-stats, F-test, DW)
- Cross-section versus time-series regressions in finance
- Overview advanced regression techniques: non-linear variables, dummy variables, non-linear estimation techniques, time-variable regression parameters
Workshop: Style analysis of a hedge fund
- Big Data & Data Mining: introduction to LASSO
- Limits to quantitative analysis: system complexity, data issues, stability, out-of-sample performance
Workshop: Identifying hedge fund performance factors
Statistical Factor Models
- Understanding principal component analysis (PCA)
Workshops: Inferring the factor structure from single stocks, modeling yield curve dynamics, and identifying extreme scenarios for stress testing purposes
- Beyond PCA: Introduction to independent component analysis (ICA)
Day Two
Fundamental Factor Modeling
- Asset pricing and fundamental factors, factor-mimicking portfolios
Workshops: Building a fundamental factor model for an equity portfolio, modeling the momentum factor
Macroeconomic Factor Modeling
- Real and monetary macroeconomic factors and transmission mechanisms
Workshop: Building a macroeconomic model for a multi-asset class portfolio, extracting factors from macroeconomic data
Applications of Factor Models
- Performance Analysis
- Return contributions from factors
- True alphas & hidden factor exposures
Workshop: Factor performance attribution
- Risk Management
- Ex-ante absolute and relative portfolio risk decomposition
Workshop: Factor attribution of absolute and relative portfolio risk
Conclusions and Outlook
Course delivery details
Courses are delivered in the London classroom and live online via LFS Live in London, New York, and Singapore time zones.
Please contact LFS for more details.
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London Financial Studies - Capital Markets Executive Education in the USA
Global markets move quickly, evolving continuously and deepening in complexity. Over the past decades London Financial Studies has provided specialist executive education programs and short courses focused exclusively on global capital markets. Preparing only the highest quality and most relevant...