Work

Best of the Best: A Comparison of Factor Models

Year: 2018

Type: article

Abstract: We compare major factor models and find that the Stambaugh and Yuan (2016) 4-factor model is the overall winner in the time-series domain. The Hou, Xue, and Zhang (2015) q-factor model takes second place and the Fama and French (2015) 5-factor model and the Barillas and Shanken (2018) 6-factor model jointly take third place. The pairwise cross-sectional R2 and the multiple model comparison tests show that the Hou et al. (2015) q-factor model, the Fama and French (2015) 5-factor and 4-factor models, and the Barillas and Shanken (2018) 6-factor model take equal first place in the horse race.

Source: Journal of Financial and Quantitative Analysis

DOI: 10.1017/s0022109018000947

Authors: Shamim Ahmed, Ziwen Bu, Daniel Tsvetanov

Institutions: University of East Anglia, University of Nottingham, University of Birmingham

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funders: Yale University, Yale School of Management, Booth School of Business, University of Chicago

OpenAlex ID: W2802773850

FWCI: 5.284

Cites: 70

Cited by: 47

Related to: 10