Do the Fama-French factors proxy for innovations in predictive variables?

• 成果类型: Article
• 署名作者: Petkova, R
• 署名单位: University System of Ohio; Case Western Reserve University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2006.00849.x
• 发表日期: 2006
• 页码: 581-612
• 关键词: BOOK-TO-MARKET; cross-section; PRICING-MODELS; risk-factors; returns; beta; tests; equilibrium; INVESTMENT; earnings

摘要

The Fama-French factors HML and SMB are correlated with innovations in variables that describe investment opportunities. A model that includes shocks to the aggregate dividend yield and term spread, default spread, and one-month Treasury-bill yield explains the cross section of average returns better than the Fama-French model. When loadings on the innovations in the predictive variables are present in the model, loadings on HML and SMB lose their explanatory power for the cross section of returns. The results are consistent with an ICAPM explanation for the empirical success of the Fama-French portfolios.