Which Factors?

Kewei Hou, Haitao Mo, Chen Xue and Lu Zhang ()

No 20682, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Many recently proposed, seemingly different factor models are closely related. In spanning tests, the q-factor model largely subsumes the Fama-French (2015, 2018) 5-and 6-factor models, and the q⁵ model captures the Stambaugh-Yuan (2017) model. The Stambaugh-Yuan factors are sensitive to their construction, and once replicated via the standard approach, are close to the q-factors, with correlations of 0.8 and 0.84. Finally, it seems difficult to motivate the Fama-French 5-factor model from valuation theory, which predicts a positive relation between the expected investment and the expected return.

JEL-codes: E22 E44 G11 G12 G14 (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-mac
Note: AP CF EFG IFM
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Citations: View citations in EconPapers (4)

Published as Kewei Hou & Haitao Mo & Chen Xue & Lu Zhang, 2019. "Which Factors?*," Review of Finance, vol 23(1), pages 1-35.

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