Exabel's Factor Model

TL;DR

This paper presents Exabel's factor model, quantifies how much factors explain return variability, and illustrates portfolio performance based on factor exposures.

Contribution

It introduces a specific factor model for risk analysis and provides empirical quantification of factor influence on returns.

Findings

Factors explain a significant portion of return variability.

Portfolios with different factor exposures show varied annual returns.

The model offers insights into risk attribution and portfolio performance.

Abstract

Factor models have become a common and valued tool for understanding the risks associated with an investing strategy. In this report we describe Exabel's factor model, we quantify the fraction of the variability of the returns explained by the different factors, and we show some examples of annual returns of portfolios with different factor exposure.