Factor models

A step-by-step explanation on how to build a factor model - Quantitative Finance Stack Exchange:

 "Economically, the use of factor models can be either motivated using the ICAPM or the APT. Although there are some theoretical differences between the model, for empirical and practical work these differences are irrelevant. In the end, both models stipulate that returns and expected returns are linear functions of the factors:"

This is an overview of some of the issues involved in building a factor model.