Comparing Asset Pricing Models

60 Pages Posted: 22 Oct 2015 Last revised: 6 Dec 2017

See all articles by Francisco Barillas

Francisco Barillas

University of New South Wales

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 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, 2015b) and Fama and French (2015, 2016) are 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)

University of New South Wales ( email )

College Rd, Kensington
Sydney, 2052
Australia

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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