Factor Pricing Across Asset Classes

We study factor pricing and market integration across major asset classes. Factor models specializing in one asset class have limited pricing power for other asset classes. Thus, we reject perfect market integration. However, an optimal integrated factor model across asset classes can effectively characterize the returns of multiple asset classes and provide a useful benchmark for multi-asset, multi-factor investing. The optimal model includes several equity and corporate bond factors, suggesting the presence of multiple systematic return drivers. Despite this, there appears to be some degree of cross-market linkages, as the optimal model does not require factors from all asset classes