Multivariate methods for asset returns

Abstract

The expansion of technology has lead to more informed citizens and curiosity in the modern trend in the world market. This has lead to increased investment opportunity. These investments models have by day, become multifactor making it difficult to analyze. This in turn has lead to the need of having statistical methods in the analysis of the multifactor investments. This study involves the multivariate approach and incorporates the statistical program R in the analysis of the Nairobi Stock Exchange (NSE) data. The multivariate analysis methods principal component analysis and factor analysis method were used in reduction of the dimension of multivariate asset returns and in analysis of asset returns. The conclusion arrived was that analysis of multivariate asset returns can be made easier using statistical methods to first reduce the dimension and then carry out the analysis.