Mer, 15/09/2021 - 12:00 / 13:00
Speaker: Mirco Rubin , EDHEC Business School
- Elena Andreou (University of Cyprus and CEPR)
- Patrick Gagliardini (Università della Svizzera italiana, Lugano and Swiss Finance Institute)
- Eric Ghysels (University of North Carolina - Chapel Hill and CEPR)
- Mirco Rubin (EDHEC Business School, Nice)
There are two commonly used approaches to cross-sectional asset pricing, each with pros and cons. One consists of collecting stocks into portfolios and subsequently estimate risk exposures. The other consists of estimating cross-sectional risk premia using the entire universe of stocks. Applying a novel test, we identify the factor space common between individual stocks and sorted portfolios - neither affected by time-varying betas nor by the sorting characteristics. We find three factors - which can only partially be explained by Fama-French five factors with(out) momentum. Our three factors also feature superior out-of-sample pricing performance compared to standard pricing models.
The event can be attended also online.