| 来源类型 | Discussion paper |
| 规范类型 | 论文 |
| 来源ID | DP13049 |
| DP13049 Factors that Fit the Time Series and Cross-Section of Stock Returns | |
| Martin Lettau | |
| 发表日期 | 2018-07-14 |
| 出版年 | 2018 |
| 语种 | 英语 |
| 摘要 | We propose a new method for estimating latent asset pricing factors that fit the timeseries and cross-section of expected returns. Our estimator generalizes Principal Component Analysis (PCA) by including a penalty on the pricing error in expected returns. We show that our estimator strongly dominates PCA and finds weak factors with high Sharpe-ratios that PCA cannot detect. Studying a large number of characteristic sorted portfolios we find that five latent factors with economic meaning explain well the cross-section and time-series of returns. We show that out-of-sample the maximum Sharpe-ratio of our five factors is more than twice as large as with PCA with significantly smaller pricing errors. Our factors are based on only a subset of the stock characteristics implying that a significant amount of characteristic information is redundant. |
| 主题 | Financial Economics |
| 关键词 | Cross section of returns Anomalies Expected returns High-dimensional data Latent factors Weak factors Pca |
| URL | https://cepr.org/publications/dp13049 |
| 来源智库 | Centre for Economic Policy Research (United Kingdom) |
| 资源类型 | 智库出版物 |
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/541855 |
| 推荐引用方式 GB/T 7714 | Martin Lettau. DP13049 Factors that Fit the Time Series and Cross-Section of Stock Returns. 2018. |
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