Macroeconomic Factor Model shows in Equity and Portfolio Management, but it seems they are different. The intercept of Macroeconomic Factor Model in Equity is the RFR; while the intercept of Macroeconomic Factor Model in Portfolio Manangement is E(Ri), which is usually from APT model. They look different for me, is this just naming conficts? I’m using Schweser.
the macroeconomic model in equity is called Burmiester Roll and Ross model and is different from the macroeconomic model in PM. it has defined set of risk factors. in PM its a family of models not a single model.
BIRR(macroeconomic factor) model is used to get the required return or expected return. Macroeconomic Factor Model in PM is used for prediction(correct me if I’m wrong), and its E(Ri) can come from a multi-factor model like APT. But where do those betas(factor sensitivities) in BIRR model come from? From a linear regression like Macroeconomic Factor Model from PM? That’s like a recursive process.