We compare the pricing ability of popular asset pricing models for the cross-section of U.S. equities on a large, liquid, but mostly segmented equity market of Chinese A-shares. The q-factor model performs well among factor models developed for the U.S. equity market, but is outperformed by a...

The Fama and French (2015) 5-factor model is commonly used to measure the performance of stock return portfolios. Importantly, we find that three of the Fama and French (2015) firm-level characteristics (i.e., size, BV/MV, and profitability) have no significant explanatory power in the...

We propose a conditional model of asset returns in the presence of common factors and downside risk. Specifically, we generalize existing latent factor models in three ways: we show how to estimate the threshold which identifies the 'disappointment' event triggering the bad state of the world; we...

We confront prominent asset pricing models with the classical out-of-sample cross-sectional test of Fama and MacBeth (1973). For all models, we uncover three main findings: (i) the intercept coefficients are economically large and highly statistically significant; (ii) the cross-sectional factor...

This paper investigates the effect of characteristic-based time-varying factor beta on the diffusion-index type forecast. Specifically, the factor beta includes two distinct components: the "instrumental beta'' is a function of some observed stable variables, while the "idiosyncratic beta''...

This paper analyzes the sources of export volatility estimating a dynamic factor model on transaction-level data. Using an exhaustive dataset covering all French export transactions over the period 1993-2017, we reconstruct the latent factor space associated to global and destination-specific...

By choosing investment strategies that intentionally create exposure to factor betas, investors may be obtaining uncompensated risks. We show across a wide variety of factors and geographical markets that factors constructed from fundamental characteristics have earned high returns, whereas...

Innovation is one of the usual suspects in defining differences in performance among firms, according to a strong and diverse theoretical framework. Understanding the diversity that exists within the population of innovative firms is essential to elaborate appropriate innovation policies. Our...