Economics at your fingertips  

Mispricing, returns and the quest for parsimony

Wanling Rudkin

Finance Research Letters, 2020, vol. 37, issue C

Abstract: In the constant trade-off between accurate modelling of stock returns and maintaining a practical number of risk factors there is clear incentive to prematurely suggest optimal solutions. Contemporary model comparison techniques prompt the revisiting of conclusions, Bayesian techniques being especially helpful to reflect the true role the observed data plays in supporting choice. As the literature enters a period of machine learning, and potential over-fitting, this is a timely reminder to give more heed to the true applicability of any proclamation on improvement in asset pricing fit.

Keywords: Mispricing; Stock returns; Asset pricing model fit; Factor model selection; Bayesian factor inclusion; Sharpe ratio tests (search for similar items in EconPapers)
JEL-codes: C02 E47 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2021-06-30
Handle: RePEc:eee:finlet:v:37:y:2020:i:c:s1544612319303216