Q-factors and Investment CAPM

Lu Zhang ()

No 26538, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The q-factor model shows strong explanatory power and largely summarizes the cross section of average stock returns. In particular, the q-factor model fully subsumes the Fama-French (2018) 6-factor model in head-to-head factor spanning tests. The q-factor model is an empirical implementation of the investment CAPM. The basic philosophy is to price risky assets from the perspective of their suppliers (firms), as opposed to their buyers (investors). As a disruptive innovation, the investment CAPM has broad-ranging implications for academic finance and asset management practice.

JEL-codes: E13 E22 E32 E44 G12 G14 G31 M41 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-fmk and nep-mac
Note: AP CF EFG IFM
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