Asset Pricing with Slope Factors: Model and Evidence of Outperformance

Chib, Siddhartha; Lin, Yi Chun; Pukthuanthong, Kuntara; Zeng, Xiaming

doi:10.2139/ssrn.4137888

SSRN Journal

2022

DOI: 10.2139/ssrn.4137888

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Asset Pricing with Slope Factors: Model and Evidence of Outperformance

Siddhartha Chib

Yi Chun Lin

Kuntara Pukthuanthong

et al.

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2024

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An examination of the characteristics versus covariance debate for contemporary asset‐pricing models: Australian evidence

Gray,

Limkriangkrai,

2024

Accounting & Finance

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As contemporary asset‐pricing models have expanded to include new factors, the empirical literature has carefully studied the time‐series fit of competing model specifications. In contrast, comparison of the roles played by characteristics and factor loadings in explaining cross‐sectional return variation has received less attention. This paper re‐examines the characteristics versus covariance debate. The findings overwhelmingly support the characteristics explanation. Firm size, book‐to‐market, profitability and investment characteristics are important for understanding differences in returns, over and above how a stock loads on common risk factors. Portfolios designed to be a pure play on a given characteristic generate economically significant trading profits.

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An examination of the characteristics versus covariance debate for contemporary asset‐pricing models: Australian evidence

Gray,

Limkriangkrai,

2024

Accounting & Finance

View full text Add to dashboard Cite

show abstract

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Asset Pricing with Slope Factors: Model and Evidence of Outperformance

Cited by 1 publication

References 18 publications

An examination of the characteristics versus covariance debate for contemporary asset‐pricing models: Australian evidence

An examination of the characteristics versus covariance debate for contemporary asset‐pricing models: Australian evidence

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