Shrinking Factor Dimension : A Reduced-Rank Approach

We apply a reduced-rank approach to reduce a large number of observable factors to a few parsimonious ones. Out of 70 factor proxies, we find that the best five combinations seem adequate and outperform the Fama-French (2015) five factors for pricing industry portfolios as expected. However, they do not improve much for pricing individual stocks. Our results suggest that new factors are wanted to reduce the pricing errors at the firm level

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Year of publication:	2020
Authors:	Huang, Dashan
Other Persons:	Li, Jiaen (contributor) ; Zhou, Guofu (contributor)
Publisher:	[2020]: [S.l.] : SSRN

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Extent:	1 Online-Ressource (88 p)
Type of publication:	Book / Working Paper
Language:	English
Notes:	Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 17, 2019 erstellt
Other identifiers:	10.2139/ssrn.3205697 [DOI]
Classification:	G1 - General Financial Markets ; G11 - Portfolio Choice ; G12 - Asset Pricing ; G17 - Financial Forecasting
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10012851970