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Understanding Eqira’s Factor Attribution Reports

At Eqira we believe that factor analysis is one of the best tools for evaluating financial time series. The rationale is simple: if we can reasonably approximate an asset’s underlying factor structure, we can better understand that asset’s past and future behavior and open the door for an extraordinary number of advanced analyses. Some of the possibilities include: projecting future risk and return, divining hidden relationships between securities, running stress tests, and, as in the case of our Factor-Based Projections, estimating real-time returns for illiquid securities such as hedge funds. In this report, we discuss how to interpret the factor attribution tables that appear in many of our reports.

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Understanding Eqira’s Factor-Based Projections

Abstract: It is very difficult to get reliable intra-month performance indications for alternatives such as hedge funds. Actual performance is typically reported monthly, often with considerable lag. The few daily indexes that do exist often exhibit enormous tracking error. This article examines the Eqira Factor-Based Projections and illustrates how they address these issues by providing reliable daily return estimates for 30 different hedge fund strategies and custom securities of our clients’ choosing.

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Introducing Eqira

It’s become customary in computer science to begin instruction in any new language with a simple program, known as “Hello, World!”, which outputs its title when executed. The rationale is simple: the program is basic enough for someone without experience to understand, particularly with the guidance of an instructor. It can be used as the basis for further instruction as more advanced features are tacked on incrementally.

It also provides a visual “pop” and a momentary sense of satisfaction. (Hey, look at what I made my computer do!)

Eqira Hello World!

It seems fitting that a company that prides itself on its logical, systematic, and data-driven approach should have its own “Hello, World!” variant. While Eqira won’t be teaching you any computer languages, we will be teaching you a new way to think about investing. To demonstrate the power of our approach, we offer this bit of insight:

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