Neoclassical Factors

Long Chen () and Lu Zhang ()

No 13282, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Building on neoclassical reasoning, we propose a new multi-factor model that consists of the market factor and factor mimicking portfolios based on investment and productivity. The neo- classical three-factor model outperforms traditional factor models in explaining the average returns across testing portfolios formed on momentum, financial distress, investment, profitability, accruals, net stock issues, earnings surprises, and asset growth. Most intriguingly, winners have higher loadings than losers on both the low-minus-high investment factor and the high- minus-low productivity factor, which in turn help explain momentum profits.

JEL-codes: G11 G12 G14 G24 G31 G32 (search for similar items in EconPapers)
Date: 2007-07
New Economics Papers: this item is included in nep-rmg
Note: AP CF EFG
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Citations: View citations in EconPapers (4)

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