intrinsicFRP: Oracle Estimation and Inference for Tradable Factor Risk Premia
Tradable factor risk premia are given by the negative factor covariance
with the Stochastic Discount Factor projection on returns. This package
provides efficient computation of tradable and Oracle tradable factor risk
premia estimators and their standard errors; see A. Quaini, F. Trojani and
M. Yuan (2023) <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4574683>.
Tradable factor risk premia are robust to misspecification or weak
identification in asset pricing models, and they are zero for any factor
weakly correlated with returns. Their Oracle estimator performs as well as
if the weak or useless factors were known in advance. This means it not only
consistently removes useless factors and factors weakly correlated with
returns but also gives rise to reliable tests of asset pricing models.
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