Abstract
A factor analytic model has many advantages when it is used as a model of equity returns. However, the attribution of the raw risk statistics to familiar stock and market phenomena is not a natural by-product of the factor analytic risk model estimation process. This chapter describes several methods that can be used to translate data from factor analysis-based risk models into traditional fundamental information that can assist with portfolio management and trading. The chapter develops tests to determine whether selected real world attributes indicate anything significant about risk. After a useful set of attributes is established, further methods are developed to characterize the risk of a portfolio. Finally, these methods are applied to a variety of fundamental attributes, sectors, countries, and macroeconomic time series to analyze a sample U. K. portfolio.
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