Multifactor Market Indexes

Wei Liu and James W. Kolari
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Wei Liu: USAA Bank, San Antonio, TX 78288, USA
James W. Kolari: Department of Finance, Mays Business School, Texas AM University, College Station, TX 77843, USA

JRFM, 2022, vol. 15, issue 4, 1-26

Abstract: This paper combines the CRSP market index with multiple factors to create a single multifactor market index. Empirical tests of different multifactor market indexes indicate that: (1) Sharpe ratios substantially increase and GRS test statistics decrease as multifactors are incrementally added to the CRSP index; and (2) the resultant multifactor market indexes are significantly priced in cross-sectional tests of associated beta loadings with t -values exceeding 3.0 in most cases.

Keywords: market index; market factor; multifactors; efficient portfolios (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
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