Methodology

Multi-Factor Models

What of the following is a general formula for a multi-factor model?

Er (i) = Rm (B1) x (Rm (B2 x B3) + ei).
Ri = V1 x Er (1) + V2 x Er (2) + ... + Vn x Er (n).
Ri = ai + ßi (m) Rm + ßi (1)F1 + ßi (2)F2 +…+ ßi (N)FN + ei.
Er (i) = R (1) + R (2) + R (3) +... + R (n).

What of the following is a general formula for a multi-factor model?

Er (i) = Rm (B1) x (Rm (B2 x B3) + ei).
Ri = V1 x Er (1) + V2 x Er (2) + ... + Vn x Er (n).
Ri = ai + ßi (m) Rm + ßi (1)F1 + ßi (2)F2 +…+ ßi (N)FN + ei.
Er (i) = R (1) + R (2) + R (3) +... + R (n).

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