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CME 242: Mathematical and Computational Finance Seminar

Speaker: Robert Anderson, UC Berkeley

Title: PCA with Model Misspecification

Abstract: The theoretical justifications for Principal Component Analysis (PCA) typically assume that the data is IID over the estimation window. In practice, this assumption is routinely violated in financial data. We examine the extent to which PCA-like procedures can be justified in the presence of two specific kinds of misspecification present in financial data: time-varying volatility, and the presence of regimes in factor loadings. Joint work with Stephen W. Bianchi (Berkeley).
Bio: Robert Anderson is a Professor of Economics and Mathematics at the University of California Berkeley, and Director of the Coleman Fung Risk Management Research Center. He has been on the Berkeley faculty since 1983. At Berkeley, he has taught calculus, real analysis, mathematics for incoming Economics Ph.D. students, microeconomic theory, and continuous-time finance, among other subjects. His research is in mathematical economics and nonstandard analysis, an alternative formulation of analysis and probability theory derived from mathematical logic. Currently, his work focuses on the economic foundations of continuous-time finance models. He obtained his Bachelor's Degree from the University of Toronto in 1974 and his Ph.D from Yale in 1977, both in Mathematics. After a one-year postdoctoral appointment, he became an Assistant Professor of Economics and Mathematics at Princeton. He was promoted to Associate Professor with tenure in 1982, and came to Berkeley a year later. He was an Alfred P. Sloan Research Fellow from 1982 to 1986, and has been a Fellow of the Econometric Society since 1987. He served two terms as Chair of the Berkeley Economics Department. His involvement with the Academic Senate began in 1992, when he began an effort to provide equal University benefits to the families of lesbian and gay University employees, resulting in the provision of health benefits in 1997 and pension benefits in 2002, with ongoing updates in response to subsequent changes in California family and tax law. He has served as Chair of the University Committee on Faculty Welfare, as parliamentarian of the Berkeley Division of the Academic Senate, and eight years as chair of the Senate's Task Force on Investments and Retirement, serving concurrently as an Academic Senate representative on the University of California Retirement System Advisory Board. Over the last eight years, he has led the Senate's increasingly urgent appeals to take action to ensure the stability of UCRP. He was awarded the Berkeley Faculty Service Award in 2009.





Kapil K Jain
Thursday, May 12, 2016 -
4:30pm to 5:30pm