Which factor model? A systematic return covariation perspective

Ahmed, Shamim ORCID: 0000-0003-3712-5213, Bu, Ziwen, Symeonidis, Lazaros and Tsvetanov, Daniel (2023) Which factor model? A systematic return covariation perspective. Journal of International Money and Finance, 136. p. 102865.

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Abstract

We examine which factor model best captures systematic return covariation by focusing on the economic implications for portfolio risk control. The pairwise variance equality test and the model confidence set procedure suggest that the Fama and French (2015) five-factor model, the Barillas and Shanken (2018) six-factor model, and the Fama and French (2018) six-factor model are the top performers for the factor model-implied minimum risk portfolios in the out-of-sample. When it comes to the minimum tracking error portfolios, the Barillas and Shanken (2018) six-factor model and the Fama and French (2018) six-factor model are the overall winners in the horse race.

Item Type:	Article
Additional Information:	Source info: Journal of International Money and Finance, Forthcoming
Uncontrolled Keywords:	Asset pricing model, Factor model, Model evaluation, Portfolio selection, Out-of-sample
Divisions:	Faculty of Humanities and Social Sciences > School of Management
Depositing User:	Symplectic Admin
Date Deposited:	27 Apr 2023 07:29
Last Modified:	09 Jul 2023 16:27
DOI:	10.1016/j.jimonfin.2023.102865
Related URLs:	Author Publisher
URI:	https://livrepository.liverpool.ac.uk/id/eprint/3169999