| Popis: |
This note presents a novel approach to the performance analysis of multi-factor investment strategies. Our main methodological contributions are threefold : first, the use of a cross-sectional projection of asset returns onto the factors to form approximate portolio returns; second, that of nonlinear, interaction terms between factors that faithfully reproduce the investment portfolio construction; third, a natural and intuitive decomposition of the portfolio performance as the sum of factor contributions. The method is presented in details, and concrete applications to multi-factor equity strategies are presented. |
