factorlasso 0.3.6

Sparse factor model estimation with sign-constrained LASSO, prior-centered regularisation, and hierarchical group LASSO (HCGL)

factorlasso

Sparse multi-output regression with sign constraints, prior-centered regularisation, hierarchical group LASSO, and sparse group LASSO — via CVXPY.

factorlasso is a small, dependency-light Python package for fitting sparse multi-output linear models

$$ Y = X\beta^\top + \varepsilon, \qquad \beta \in \mathbb{R}^{N \times M} $$

when four things matter:

• Some coefficients must be zero, non-negative, or non-positive, possibly by asset, by factor, or both.
• You have a prior β₀ and want to penalise ‖β − β₀‖, not ‖β‖.
• You want structured sparsity — groups of responses entering or leaving the model together — where the groups are either user-supplied or discovered by hierarchical clustering of the response correlation matrix (HCGL).
• You want to combine group-level selection with within-group elementwise sparsity via a tunable mix of group L2 and L1 penalties (Sparse Group LASSO).

It is written in pure numpy/pandas/scipy/cvxpy. No numba, no custom coordinate descent. The solver is CVXPY (default CLARABEL), so problem formulation is explicit and auditable.

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Installation

pip install factorlasso

Requires Python ≥ 3.9, CVXPY ≥ 1.3, and numpy / pandas / scipy / openpyxl.

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Quickstart

import numpy as np
import pandas as pd
from factorlasso import LassoModel, LassoModelType

rng = np.random.default_rng(0)
T, M, N = 200, 4, 10
X = pd.DataFrame(rng.standard_normal((T, M)), columns=[f"f{i}" for i in range(M)])
Y = pd.DataFrame(rng.standard_normal((T, N)), columns=[f"y{i}" for i in range(N)])

model = LassoModel(model_type=LassoModelType.LASSO, reg_lambda=1e-3).fit(x=X, y=Y)

model.coef_         # (N, M) estimated β
model.intercept_    # (N,) estimated α
model.predict(X)    # Ŷ
model.score(X, Y)   # mean R²

The API mirrors scikit-learn: fit(x, y), predict(x), score(x, y), get_params(), set_params(). Fitted attributes carry a trailing underscore.

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What makes it different

1. Per-element sign constraints

A (N × M) matrix drives the constraints. Each entry is one of {0, 1, -1, NaN}: equality-to-zero, non-negative, non-positive, or free. This lets a single fit encode structural knowledge that spans multiple responses.

signs = pd.DataFrame(np.nan, index=Y.columns, columns=X.columns)
signs.loc["y0", "f0"] = 1      # β[y0, f0] ≥ 0
signs.loc["y0", "f1"] = 0      # β[y0, f1] == 0
signs.loc["y1", "f0"] = -1     # β[y1, f0] ≤ 0

model = LassoModel(
    reg_lambda=1e-3,
    factors_beta_loading_signs=signs,
).fit(x=X, y=Y)

Scikit-learn's Lasso supports only a single positive flag across the whole coefficient matrix. Arbitrary per-element sign constraints are not expressible without a custom CVXPY problem; this is that custom problem, packaged.

2. Prior-centered regularisation

Pass a (N × M) DataFrame factors_beta_prior to penalise ‖β − β₀‖ instead of ‖β‖. The prior is a soft target, not a hard constraint — the penalty tension between data fit and prior is still controlled by reg_lambda.

prior = 0.5 * np.sign(X.corrwith(Y["y0"]).to_numpy())
# ... build an (N, M) DataFrame `prior_df` with that structure ...

model = LassoModel(
    reg_lambda=1e-3,
    factors_beta_prior=prior_df,
).fit(x=X, y=Y)

3. Hierarchical Clustering Group LASSO (HCGL)

The groups in classical group LASSO are user-specified. HCGL discovers them from the data: EWMA correlation of the response matrix → Ward's linkage → dendrogram cut at cutoff_fraction × max(pdist) → block-sparse penalty on the resulting clusters.

model = LassoModel(
    model_type=LassoModelType.GROUP_LASSO_CLUSTERS,
    reg_lambda=1e-4,
    cutoff_fraction=0.5,   # tune granularity; smaller → tighter clusters
    span=60,               # EWMA span for correlation estimate
).fit(x=X, y=Y)

model.coef_        # (N, M)
model.clusters_    # pd.Series of cluster labels per response
model.linkage_     # scipy linkage matrix

Useful when you suspect group structure in the responses but don't know the partition — or when the correct partition drifts over time, so any manual grouping would need to be refit anyway.

4. Sparse Group LASSO

Group LASSO selects whole groups in or out — every response inside an "active" group gets a non-zero loading. When the discovered groups are slightly heterogeneous (and HCGL clusters often are, especially at coarser cutoff_fraction), this admits noisy within-group loadings on responses that don't actually load on the factor.

The l1_weight mixing parameter α ∈ [0, 1] adds an elementwise L1 penalty on top of the group L2 (Simon, Friedman, Hastie & Tibshirani 2013):

$$ \mathcal{P}(\beta) = (1 - \alpha),\lambda \sum_g w_g , |\beta_g - \beta_0|_{2,1} ;+; \alpha,\lambda , |\beta - \beta_0|_1 $$

model = LassoModel(
    model_type=LassoModelType.GROUP_LASSO_CLUSTERS,
    reg_lambda=1e-4,
    cutoff_fraction=0.65,   # coarser clusters
    l1_weight=0.10,         # α — group L2 still primary, L1 corrects within-group
).fit(x=X, y=Y)

The interpretation is "group-then-prune": the group L2 term still drives group-level selection, while the L1 term zeros individual asset-factor coefficients within active groups whose contribution is noise. Setting l1_weight=0.0 (the default) reduces exactly to pure group LASSO and is backward-compatible — the L1 term is dropped from the CVX problem entirely when α = 0, with zero runtime cost.

Typical research range: α ∈ [0.05, 0.20]. Above ~0.30 the group structure stops driving the model and the result reverts toward plain LASSO. The penalty is centered on the same prior β₀ as the group term, so the two shrinkage mechanisms compose consistently.

The L1 term respects the same per-element sign constraints and the same prior as the group term, so all four features in this section compose: a single fit can simultaneously enforce sign constraints, shrink toward a prior, group-select via HCGL clusters, and apply within-group elementwise sparsity.

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When to use it — and when not

Use it when:

• Multi-output LASSO with heterogeneous sign constraints across the coefficient matrix.
• You have a prior β₀ that should shrink the fit instead of zero.
• You need discovered-group structured sparsity (HCGL).
• You need group-level selection with within-group elementwise sparsity (sparse group LASSO at small-to-moderate α).
• You want a small, auditable CVXPY-based tool rather than a coordinate-descent library with opaque internals.

Reach for something else when:

• Your problem is single-output elastic-net at large scale — scikit-learn, celer, or skglm will be faster and have years of battle-testing.
• You need fixed-group group LASSO at very large scale — group-lasso or asgl are the standard tools.
• You need sparse group LASSO at large α (close to 1.0) or at very large scale — specialised solvers like asgl or SGL handle proximal-operator acceleration that the CVXPY formulation here does not. This package's sparse group LASSO is intended for moderate α ∈ [0, 0.3] where the group structure remains primary.
• You need non-linear models, random effects, or GLM link functions.

A feature-by-feature comparison matrix is in COMPARISON.md.

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Examples

Three runnable examples in examples/:

• genomics_factor_model.py — QTL-style multi-response LASSO: genotype matrix → expression panel, with sign constraints derived from biological priors.
• finance_factor_model.py — Multi-asset factor decomposition with sign constraints and HCGL clustering.
• cv_lambda_selection.py — Time-series cross-validated reg_lambda selection via LassoModelCV with expanding-window splits.

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Testing

pip install -e ".[dev]"
pytest

The suite currently has 201 tests at 98%+ coverage, including numerical parity tests against qis for the EWMA primitives and against scikit-learn for the LASSO path.

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Citation

If you use factorlasso in academic work, please cite:

@article{SeppOssaKastenholz2026,
  author  = {Sepp, Artur and Ossa, Ivan and Kastenholz, Mika},
  title   = {Robust Optimization of Strategic and Tactical Asset Allocation
             for Multi-Asset Portfolios},
  journal = {The Journal of Portfolio Management},
  year    = {2026},
  volume  = {52},
  number  = {4},
  pages   = {86--120},
}

@software{factorlasso,
  author  = {Sepp, Artur},
  title   = {factorlasso: Sparse Factor Model Estimation with Constrained LASSO
             in Python},
  year    = {2026},
  url     = {https://github.com/ArturSepp/factorlasso},
}

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Contributing & feedback

Issues and pull requests welcome at https://github.com/ArturSepp/factorlasso.

See CHANGELOG.md for release history.

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License

MIT — see LICENSE.