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MAFINRISK 2020: Factor Models for Portfolio Construction

Topics in Financial Econometrics with R Part 2



Carlo Favero ( 

  1. Objective of the Course
  2. Detailed Syllabus

Exam March 2019, factormodels.R, Exam.rnw and an Rnw File with detailed exam solutions 


EXAM MARCH 2020, the .zip file with all the relevant material, exam solutions 

 1. Objective of the Course

This part of the course is aimed at discussing  Factor Models for Portfolio Construction . 

The course, for a total of  8 hours, is structured on 2 parts, there is no explicit separation between theoretical and experiential learning and all models be discussed via hands-on applications in R 

2. Textbooks and other support materials

Software requirements:
R v. 3.3.2 or higher installed (
RStudio v. 1.0.136 or higher installed (
MiKTeX, FULL version: Through the link below, download and extract ProTeXt, run Setup.exe and install MiKTeX full version: (
MiKteX, BASIC version (only if full version cannot be installed): Install basic version, open MiKTeX Package Manager, Repository, Synchronize.
R packages: - ( brew, data.table, dplyr, forecast, ggplot2, gtable, knitr, lazyeval, plyr, quadprog, readr, reshape, reshape2, RODBC, scales, sos, timeDate, tseries, XLConnect, xlsx, xtable, zoo, TTR.

Basic readings:
CHRISTOFFERSEN P.F. (2012) "Elements of Financial Risk Management", 2nd edition,Academic Press
SINGH AK and  ALLEN(2017) R in Finance and Economics. A Beginners Guide, World Scientific Publishing
ZIVOT and WANG(2006) Modelling Financial Time-Series with S-Plus, Springer , in particular Chapter 15 "Factor Models for Asset Returns" 
ANG A. (2014) "Asset Management", Oxford University Press

The Econometrics of Financial Returns and Risk Measurement , available at )

Detailed Syllabus

1. Asset Allocation with Factor Models (Lectures 1-2)
The Econometrics of Financial Returns
The Econometric Modelling Process
The Traditional Approach:CER 
A Static Asset Allocation Problem with CER 
Factor Models and Asset Allocation with Factor Models
Applications: The single Factor Model, Industry Factors Models

SLIDES, An R Code for the lecture slides
An R Code on Factor Modelling by E.Zivot 
SLIDES to Illustrate the R Code 

2.  Multifactor Portfolio Construction in Arca Fondi Sgr (with Federico Mosca)

Federico Mosca (Aca fondi) will ilustrate the Multifactor Portfolio Methods used at Arca Fondi. 
His lecture will be supported by the platform ARPM (, access to which will be granted to attending students




Last update 21/04/2020

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