MacroFactor.Cov {FinCovRegularization}

Covariance Matrix Estimation by Macroeconomic Factor Model

Description

Estimate covariance matrix by fitting a macroeconomic factor model using time series regression

Usage

MacroFactor.Cov(assets, factor)

Arguments

assets

a N*p matrix of asset returns, N indicates sample size and p indicates the dimension of asset returns

factor

a numerical vector of length N, or a N*q matrix of macroeconomic factor(s), q indicates the dimension of factors

Value

an estimated p*p covariance matrix

Examples

data(m.excess.c10sp9003)
assets <- m.excess.c10sp9003[,1:10]
factor <- m.excess.c10sp9003[,11]
MacroFactor.Cov(assets, factor)