Empirical Cross-Sectional Asset Pricing

Michael Donadelli, Michele Costola and Ivan Gufler
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Michael Donadelli: University of Brescia
Michele Costola: Ca’ Foscari University of Venice
Ivan Gufler: Luiss Guido Carli

Chapter 7 in Essentials of Financial Economics, 2025, pp 187-202 from Springer

Abstract: Abstract Understanding why different assets generate varying rates of return is one of the cornerstone questions in finance. Although daily return fluctuations are often attributed to the arrival of new market information, the broader question of what drives differences in average returns across securities requires deeper exploration. Asset pricing models play a crucial role in uncovering these underlying factors, offering frameworks to explain how risks, market conditions, and investor behavior influence the long-term performance of different financial assets. Cross-sectional asset pricing aims to explain why different assets earn different average returns. Unlike time-series models (which focus on how an asset’s return varies over time), cross-sectional models examine how returns vary across assets at a given point in time.

Date: 2025
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DOI: 10.1007/978-3-031-86189-5_7

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