Seminar (Dept. of Finance)

Theme：Winners from Winners: A Tale of Risk Factors

Speaker：Assistant Professor of Finance, HSBC Business School, Peking University

Time：2021-12-10 09:00

Address：Zoom Meeting

Language：Chinese/English

Venue：Zoom Meeting

https://zoom.us/j/84700538568?pwd=ZVA0MGM0SWpZSGsydXdmc05DODVLZz09 

Meeting ID：847 0053 8568

password：1210 

ABSTRACT:

Starting from the twelve distinct risk factors from Fama and French (1993, 2015, 2018), Hou, Xue, and Zhang (2015), Stambaugh and Yuan (2017), and Daniel, Hirshleifer, and Sun (2020), we construct and compare all possible asset pricing models by the Bayesian method of Chib, Zeng and Zhao (2020), and find that six risk factors, Mkt, SMB, MOM, ROE, MGMT, and PEAD, perform the best in terms of Bayesian posterior probability. A more extensive model comparison of 8,388,607 models, constructed from the twelve winners plus eleven principal components (PCs) of anomalies unexplained by the winners, shows that the best model consists of {Mkt, RMW, MOM, IA, ROE, MGT, PEAD, FIN} and the non-consecutive {PC1, PC3, PC4, PC5, and PC7}. The pricing performance suggests that these risk factors should be used for computing expected returns and for assessing investment strategies, instead of the risk factors in one of the other four collections.

SHORT BIOGRAPHY:

Lingxiao Zhao is now an Assistant Professor of Finance at Peking University HSBC Business School. She got her Ph.D. degree in Economics from Washington University in St. Louis. Her research interests mainly focus on theoretical and empirical asset pricing, Bayesian econometrics, and venture capital. Her recent work on asset pricing model comparison was published in the Journal of Finance.