The Risk and Return from Factors

Louis K. C. Chan, Jason Karceski and Josef Lakonishok

No 6098, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The ability to identify which factors best capture systematic return covariation is central to applications of multifactor pricing models. This paper uses a common data set to evaluate the performance of various proposed factors in capturing return comovements. Factors associated with the market, size, past return, book-to-market and dividend yield help explain return comovement on an out-of-sample basis (although they are not necessarily associated with large premiums in average returns). Except for the default premium and the term premium, macroeconomic factors perform poorly. We document regularities in the behavior of the more important factors, and confirm their influence in the Japanese and U.K. markets as well.

JEL-codes: G12 (search for similar items in EconPapers)
Date: 1997-07
Note: AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published as Louis K. C. Chan & Jason Karceski & Josef Lakonishok, 1998. "The Risk and Return from Factors," The Journal of Financial and Quantitative Analysis, vol 33(2).

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