Estimating Forward-Looking Stock Correlations from Risk Factors

Estimating Forward-Looking Stock Correlations from Risk Factors

This study provides fully mathematically and economically feasible solutions to estimating implied correlation matrices in equity markets. Factor analysis is combined with option data to receive ex ante beliefs for cross-sectional correlations. Necessary conditions for implied correlation matrices t...

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Bibliographic Details
Main Authors: Wolfgang Schadner, Joshua Traut
Format: Article
Language:English
Published: MDPI AG 2022-05-01
Series:Mathematics
Subjects:
risk factors
implied correlation
equity risk
factor analysis
invertible matrix
correlation matrix
Online Access:https://www.mdpi.com/2227-7390/10/10/1649

Internet

https://www.mdpi.com/2227-7390/10/10/1649

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