Winners from Winners: A Tale of Risk Factors

• 成果类型: Article
• 署名作者: Chib, Siddhartha; Zhao, Lingxiao; Zhou, Guofu
• 署名单位: Washington University (WUSTL); Peking University; Peking University Shenzhen Graduate School (PKU Shenzhen)
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.4668
• 发表日期: 2024
• 关键词: Bayesian model comparison; factor models; Anomaly; stochastic discount factor; portfolio analysis

摘要

Starting from twelve distinct factors from the recent literature, plus twelve principal components (PCs) of anomalies unexplained by the initial factors, a Bayesian comparison of approximately seventeen million models in terms of marginal likelihoods and posterior model probabilities shows that {Mkt, MOM, IA, ROE, MGMT, PERF, PEAD, FIN}, plus the nonconsecutive principal components, {PC1, PC5, PC7} are the best supported risk factors. Pricing tests and annualized out-of-sample Sharpe ratios for tangency portfolios suggest that this asset pricing model should be used for computing expected returns, assessing investment strategies and building portfolios.