Identifying Financial Risk Factor with Sparse and Low-Rank Decompositions
You are cordially invited to attend the FRE Lecture. Lisa Goldberg will present a talk on the following topic:
Title
Identifying Financial Risk Factor with Sparse and Low-Rank Decompositions
Abstract
We show how to use sparse and low-rank (SLR) matrix decompositions based on convex optimization to extract financial risk factors from a sample return covariance matrix. We provide an example that highlights the difference between this approach and the academic standard for financial factor identification, principal component analysis (PCA), which makes systematic errors. Using finance-oriented metrics, we analyze the accuracy of SLR and PCA on equally weighted portfolios and minimum variance portfolios in a simulated global equity market. This research is in collaboration with Alex Shkolnik.
Bio
Lisa Goldberg is Adjunct Professor of Economics and Statistics at UC Berkeley, and Director of Research at Aperio Group. Her interests include financial economics, statistical evaluation of investment strategies, asset allocation, credit and counterparty risk, socially responsible investing, and the statistics of basketball.
We look forward to seeing you there. Refreshments will be served.