A Factor Model Comparison

Yuming Li ()
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Yuming Li: Department of Finance, College of Business and Economics, California State University

Annals of Economics and Finance, 2024, vol. 25, issue 2, 663-674

Abstract: Recently, various models have been proposed to explain the cross section of returns in the U.S. stock markets. I present a comparison of a microcap-based factor model with other competing models. I find that the microcap factors mostly explain factors in other models, especially the models of Fama and French (2015, 2016), but not vice versa. In contrast, all-size investment and profitability factors do not perform well in explaining the microcap return spreads. In addition, I find that it is necessary to include multiple characteristics in constructing microcap factors, in order to better explain the microcap return spreads.

Keywords: Microcaps; Factor models; Investment; Profitability (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2024:v:25:i:2:li

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