Factor Regression Analysis

This factor regression tool supports factor regression analysis of individual assets or a portfolio of assets using the given risk factor model. The multiple linear regression indicates how well the returns of the given assets or a portfolio are explained by the risk factor exposures. The supported equity risk factor models include:

• The capital asset pricing model (CAPM) with market factor (MKT)
• The Fama-French three factor model with market, size, and value factors (MKT, SMB, HML)
• The Carhart four-factor model with market, size, value, and momentum factors (MKT, SMB, HML, MOM)
• The Fama-French five factor model with market, size, value, profitability, and investment factors (MKT, SMB, HML, RMW, CMA)
• The q-factor model with market, size, investment, return on equity, and expected growth factors (MKT, ME, I/A, ROE, EG)

Additional supported equity factors include the short and long-term reversal factors (STREV, LTREV) based on Fama-French factor data, quality (QMJ) factor based on both AQR and Alpha Architect factor data, and bet against beta (BAB) factor based on AQR factor data.

For fixed income funds and balanced funds you can include the fixed income factor model to explain returns based on term risk (interest rate risk) and credit risk exposures. The fixed income factors can be further adjusted to account for the yield curve and to add high yield credit risk as an additional factor.

Additionally you can freely construct the factor model using any combination of existing factors or other time series under the custom factor returns model.