Why multi-asset investing calls for 3G factor models

Factor models can be helpful in identifying unseen risks in investor portfolios


Factor models continue to increase in popularity, especially due to their most appealing attribute: the simplification of otherwise bewildering array of risk and return measures into a handful of explanatory causes. The aim is to identify a small number of causes (factors) that explain the complex dynamics of a large number of moving parts (securities in a portfolio). Factor modelling isn't just used in financial services: the statistical techniques we employ in our industry are just as ubiquito