Factor Models: Latent Variables and Asset Pricing

This lecture covers Factor Models, including Partial Least Squares and Singular Value Decomposition. It explains how latent variables are obtained through PCA and how they are used in asset pricing models like CAPM. The lecture also delves into factor investing, discussing anomalies detection and the Fama-French models. Additionally, it explores the Generalized Method of Moments (GMM) for parameter estimation and Shanken correction for standard errors. The Fama-McBeth estimation method is presented as an alternative to cross-sectional regression.