Deep Learning in Asset Pricing

• 成果类型: Article
• 署名作者: Chen, Luyang; Pelger, Markus; Zhu, Jason
• 署名单位: Stanford University; Stanford University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4695
• 发表日期: 2024
• 关键词: conditional asset pricing model; No arbitrage; stock returns; nonlinear factor model; Cross-section of expected returns; Machine Learning; Deep learning; big data; hidden states; gmm

摘要

We use deep neural networks to estimate an asset pricing model for individual stock returns that takes advantage of the vast amount of conditioning information, keeps a fully flexible form, and accounts for time variation. The key innovations are to use the fundamental no-arbitrage condition as criterion function to construct the most informative test assets with an adversarial approach and to extract the states of the economy from many macroeconomic time series. Our asset pricing model outperforms out-of-sample all benchmark approaches in terms of Sharpe ratio, explained variation, and pricing errors and identifies the key factors that drive asset prices.