Abstract

http://ssrn.com/abstract=2083166
 
 

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Dissecting Factors


Joseph Gerakos


University of Chicago - Booth School of Business

Juhani T. Linnainmaa


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

January 1, 2014

Fama-Miller Working Paper
Chicago Booth Research Paper No. 12-18

Abstract:     
Size and book-to-market split into two components, one correlated with changes in market value and the other with everything else. Only the market value components have positive risk premia. Average returns are flat across portfolios based on the other parts, but their loadings on SMB and HML differ significantly. This mismatch between covariances and average returns generates significant alphas for high-minus-low portfolios. The estimated fraction of skilled fund managers increases from 4% to 18% when we control for the other parts. Also, the other part of value drives the negative correlation between gross profitability and value.

Number of Pages in PDF File: 48

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Date posted: June 13, 2012 ; Last revised: January 21, 2014

Suggested Citation

Gerakos, Joseph and Linnainmaa, Juhani T., Dissecting Factors (January 1, 2014). Fama-Miller Working Paper; Chicago Booth Research Paper No. 12-18. Available at SSRN: http://ssrn.com/abstract=2083166 or http://dx.doi.org/10.2139/ssrn.2083166

Contact Information

Joseph J. Gerakos
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Ave.
Chicago, IL 60637
United States
773-834-6882 (Phone)
Juhani T. Linnainmaa (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
(773) 834-3176 (Phone)
(773) 753-1052 (Fax)
HOME PAGE: http://faculty.chicagobooth.edu/juhani.linnainmaa
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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