59 Pages Posted: 22 Oct 2015 Last revised: 17 Feb 2017
Date Written: January 2, 2017
A Bayesian asset-pricing test is derived that is easily computed in closed-form from the standard F-statistic. Given a set of candidate traded factors, we develop a related test procedure that permits an analysis of model comparison, i.e., the computation of model probabilities for the collection of all possible pricing models that are based on subsets of the given factors. We find that the recent models of Hou, Xue and Zhang (2015a,b) and Fama and French (2015, 2016) are both dominated by a variety of models that include a momentum factor, along with value and profitability factors that are updated monthly.
JEL Classification: G10, G12
Suggested Citation: Suggested Citation
Barillas, Francisco and Shanken, Jay A., Comparing Asset Pricing Models (January 2, 2017). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2676709 or http://dx.doi.org/10.2139/ssrn.2676709