On textbook 4 page 484, the calculation is based on risk factor coefficients of a four-factor model and the factor variance–covariance matrix, but in Equation 8(b) xj is identified as the asset’s weight in the portfolio. The result is solved from
(0.733 × 0.00178 × 0.733) + (0.733 × 0.00042 × –0.328) + (0.733 × 0.00066 × 0.045) + (0.733 × –0.00062 × 0.042) = 0.000858
0.733 × 0.00178 × 0.733 is market factor coefficient * variance/covariance * market factor coefficient with other factor
There is no weight involved in the calculation.
How to interpret the calculation?