Spectral factor models

• 成果类型: Article
• 署名作者: Bandi, Federico M.; Chaudhuri, Shomesh E.; Lo, Andrew W.; Tamoni, Andrea
• 署名单位: Johns Hopkins University; Massachusetts Institute of Technology (MIT); The Santa Fe Institute; Rutgers University System; Rutgers University New Brunswick; Rutgers University Newark
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.04.024
• 发表日期: 2021
• 页码: 214-238
• 关键词: Systematic risk; factor models; frequency; Cross-sectional asset pricing

摘要

We represent risk factors as sums of orthogonal components capturing fluctuations with cycles of different length. The representation leads to novel spectral factor models in which systematic risk is allowed-without being forced-to vary across frequencies. Frequency specific systematic risk is captured by a notion of spectral beta . We show that traditional factor models restrict the spectral betas to be constant across frequencies. The restriction can hide horizon-specific pricing effects that spectral factor models are designed to reveal. We illustrate how the methods may lead to economically meaningful dimensionality reduction in the factor space. (c) 2021 Published by Elsevier B.V.