Comparing Asset Pricing Models

59 Pages Posted: 22 Oct 2015 Last revised: 17 Feb 2017

Francisco Barillas

Emory University - Goizueta Business School

Jay A. Shanken

Emory University - Goizueta Business School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2, 2017

Abstract

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

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

Francisco Barillas (Contact Author)

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

Jay A. Shanken

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States
404-727-4772 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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