Download This PaperA Comparison of Global Factor Models
70 Pages Posted: 2 Mar 2020 Last revised: 31 Mar 2020
Date Written: July 04, 2024
Abstract
I compare commonly employed factor models across 50 non-U.S. developed and emerging market countries by ranking them based on their maximum Sharpe ratios. Consistent with U.S. evidence in Barillas, Kan, Robotti, and Shanken (2020), a six-factor model that includes cash-based profitability and momentum factors, as well as a monthly updated value factor, dominates the other factor models. This result is robust in out-of-sample tests, across subperiods, across regions, and to methodological changes. The main problem with the dominated factor models is that they do not explain the monthly updated value factor, for which I also provide an economic motivation.
Keywords: Empirical asset pricing, Factor models, Value, Momentum, Profitability
JEL Classification: G12, G14, G15
Suggested Citation: Suggested Citation