Comparing factor models with price-impact costs

• 成果类型: Article
• 署名作者: Li, Sicong; Demiguel, Victor; Martin-Utrera, Alberto
• 署名单位: Chinese University of Hong Kong; University of London; London Business School; Iowa State University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2024.103949
• 发表日期: 2024
• 关键词: trading costs; Mean-variance utility; Statistical test

摘要

We propose a formal statistical test to compare asset-pricing models in the presence of price impact. In contrast to the case without trading costs, we show that in the presence of price-impact costs different models may be best at spanning the investment opportunities of different investors depending on their absolute risk aversion. Empirically, we find that the five-factor model of Hou et al. (2021), the six-factor model of Fama and French (2018) with cash-based operating profitability, and a high-dimensional model are best at spanning the investment opportunities of investors with high, medium, and low absolute risk aversion, respectively.