Factor Models of Asset Returns and Bear Market Risk

• 成果类型: Article
• 署名作者: Massacci, Daniele; Sarno, Lucio; Trapani, Lorenzo
• 署名单位: University of London; King's College London; University of Cambridge; University of Cambridge; Centre for Economic Policy Research - UK; University of Pavia; University of Leicester
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.04276
• 发表日期: 2026
• 关键词: Asset pricing; Bear market risk; latent factors

摘要

We propose a conditional model of asset returns that allows for good and bad states of the world, depending on bear market risk. Specifically, we generalize existing latent factor models in three ways: we show how to estimate the threshold that identifies the disappointment event triggering the bad state of the world, we permit different factor structures for asset returns in good and bad states, and we show how to estimate consistently the conditional risk premia of observable factors from the estimated latent factors. The usefulness of the conditional model is illustrated with an empirical application to a broad cross-section of stock portfolio excess returns.