Fat-tailed factors

Independent component analysis is proposed as an alternative to principal component analysis

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Standard principal component analysis-based factor analysis suffers from a number of well-known problems due to the random nature of pairwise correlations of asset returns. Jan Rosenzweig analyses an alternative based on independent component analysis (ICA), where factors are identified based on their non-Gaussianity instead of their variance

Analysis of portfolio returns is usually performed with reference to the relationship between the portfolio’s returns

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