Improving Estimation of Portfolio Risk Using New Statistical Factors

Searching for new effective risk factors on stock returns is an important research topic in asset pricing. Factor modeling is an active research topic in statistics and econometrics, with many new advances. However, these new methods have not been fully utilized in asset pricing application. In this paper, we adopt the factor models, especially matrix factor models in various forms, to construct new statistical factors that explain the variation of stock returns. Furthermore, we evaluate the con...