Risk Information and Management
This chapter focuses on three risk-management topics: early warning systems; component risk analysis; and factor analysis. An early warning system offers the potential to detect structural breaks in a time series and forecast potential distressed market periods. Each risky asset in a portfolio contributes to the overall risk of a portfolio through the asset’s inherent risk as well as the weight assigned to it. Factor analysis is used to identify external or internal factors that are contributing most strongly to the observed return performance of a portfolio. Two warning systems, component risk analysis techniques and a factor model are developed in this chapter and applied to example REIT portfolios.
Dynamic Modeling and Econometrics in Economics and Finance
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Lindquist, W. Brent; Rachev, Svetlozar T.; Hu, Yuan; and Shirvani, Abootaleb, "Risk Information and Management" (2022). Kean Publications. 720.