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Comparing Asset Pricing Models

Francisco Barillas and Jay Shanken ()

No 21771, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A Bayesian asset-pricing test is derived that is easily computed in closed-form from the standard F-statistic. Given a set of candidate traded factors, we develop a related test procedure that permits an analysis of model comparison, i.e., the computation of model probabilities for the collection of all possible pricing models that are based on subsets of the given factors. We find that the recent models of Hou, Xue and Zhang (2015a,b) and Fama and French (2015a,b) are both dominated by five and six-factor models that include a momentum factor, along with value and profitability factors that are updated monthly.

JEL-codes: G11 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-ore
Date: 2015-12
Note: AP
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Published as FRANCISCO BARILLAS & JAY SHANKEN, 2018. "Comparing Asset Pricing Models," The Journal of Finance, vol 73(2), pages 715-754.

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