Best of the Best: A Comparison of Factor Models

Shamim Ahmed, Ziwen Bu and Daniel Tsvetanov

Journal of Financial and Quantitative Analysis, 2019, vol. 54, issue 4, 1713-1758

Abstract: We compare major factor models and find that the Stambaugh and Yuan (2016) 4-factor model is the overall winner in the time-series domain. The Hou, Xue, and Zhang (2015) q-factor model takes second place and the Fama and French (2015) 5-factor model and the Barillas and Shanken (2018) 6-factor model jointly take third place. The pairwise cross-sectional R2 and the multiple model comparison tests show that the Hou et al. (2015) q-factor model, the Fama and French (2015) 5-factor and 4-factor models, and the Barillas and Shanken (2018) 6-factor model take equal first place in the horse race.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:54:y:2019:i:04:p:1713-1758_00

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