Comparing Asset Pricing Models

54 Pages Posted: 7 Dec 2015

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: December 2015

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 (2015a,b) are both dominated by five and six-factor models that include a momentum factor, along with value and profitability factors that are updated monthly.

Suggested Citation

Barillas, Francisco and Shanken, Jay A., Comparing Asset Pricing Models (December 2015). NBER Working Paper No. w21771, Available at SSRN: https://ssrn.com/abstract=2700000

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
33
Abstract Views
479
PlumX Metrics