factors

Learning objectives: Provide examples of factors that impact asset prices and explain the theory of factor risk premiums. Describe the capital asset pricing model (CAPM) including its assumptions and explain how factor risk is addressed in the CAPM. Explain implications of using the CAPM to...

Factors are categorical vectors. Specifically, they are (integer) vectors that store categorical values, or ordinal values. Ordinal values are *ranked* categories (but they are not intervals). Factors can only contain predefined values. A classic example of a factor are male/female. An example...

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