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Owner @master@master · 4866 posts · 1 joined · Status active · Posting permission: Every logged-in user can post

A Statistical FX Factor Model(disqus.com)
Factor models attempt to explain asset returns. You can approach this in two ways: define the factors you think are relevant, or use statistical learning to build the relevant factors from the data. My previous post took the first approach. This post will use principal component analysis (PCA) to let the data tell us which factors are most relevant in an FX factor model.