%0 Journal Article %A Robert F. Engle %A Sergio M. Focardi %A Frank J. Fabozzi %A Barbara J. Mack %T Practical Applications of Issues in Applying Financial Econometrics to Factor-Based Modeling in Investment Management %D 2016 %R 10.3905/pa.2016.4.2.179 %J Practical Applications %P 1-4 %V 4 %N 2 %X Issues in Applying Financial Econometrics to Factor-Based Modeling in Investment Management Robert F Engle Sergio M Focardi Frank J Fabozzi Factor models can be powerful tools for the management of trading strategies, portfolio management and risk control, but implementation can be tricky.In Issues in Applying Financial Econometrics to Factor-Based Modeling in Investment Management , authors Robert Engle ( NYU Stern School of Business ), Sergio Focardi ( Pôle Universitaire Léonard De Vinci ) and Frank Fabozzi ( EDHEC ) provide a practical approach for investors who want to avoid the most common pitfalls of factor-based modeling—especially overfitting and the curse of dimensionality.The authors identify three major challenges: The appropriate choice of type and quantity of factors, the issue of under- and overfitting, and biased backtesting results. %U https://pa.pm-research.com/content/iijpracapp/4/2/1.14.full.pdf