Taming the Factor Zoo: A Test of New Factors

• 成果类型: Article
• 署名作者: Feng, Guanhao; Giglio, Stefano; Xiu, Dacheng
• 署名单位: City University of Hong Kong; National Bureau of Economic Research; Center for Economic & Policy Research (CEPR); University of Chicago
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12883
• 发表日期: 2020
• 页码: 1327-1370
• 关键词: cross-section; stock returns; financial constraints; REGRESSION SHRINKAGE; model selection; FUTURE EARNINGS; Cash flows; RISK; INVESTMENT; INFORMATION

摘要

We propose a model selection method to systematically evaluate the contribution to asset pricing of any new factor, above and beyond what a high-dimensional set of existing factors explains. Our methodology accounts for model selection mistakes that produce a bias due to omitted variables, unlike standard approaches that assume perfect variable selection. We apply our procedure to a set of factors recently discovered in the literature. While most of these new factors are shown to be redundant relative to the existing factors, a few have statistically significant explanatory power beyond the hundreds of factors proposed in the past.