Diversification and the Optimal Construction of Basis Portfolios
比较了构建基准投资组合以模拟共同因子的不同策略，发现最大似然因子分析结合最小特质风险组合构建能产生经济上和统计上更优的基准组合。
Nontrivial diversification possibilities arise when a factor model describes security returns. This paper catalogs the merits of alternative strategies for constructing basis portfolios to mimic the common factors. We show how to use the 𝜒 2 statistic for the joint significance of mean basis portfolio returns to rank alternative procedures and the bootstrap to perform inferences on the disparity between 𝜒 2 statistics across portfolio formation procedure, estimation method, cross-section size, and number of factors. Our main conclusion is that maximum likelihood factor analysis coupled with minimum idiosyncratic risk portfolio formation yields economically and statistically superior basis portfolios compared with those derived from asymptotic principal components.