How Do Factor Premia Vary Over Time? A Century of Evidence

53 Pages Posted: 17 Jun 2019 Last revised: 20 Dec 2019

See all articles by Antti Ilmanen

Antti Ilmanen

AQR Capital Management

Ronen Israel

AQR Capital Management, LLC

Tobias J. Moskowitz

Yale University, Yale SOM; AQR Capital; National Bureau of Economic Research (NBER)

Ashwin K Thapar

AQR Capital Management, LLC

Franklin Wang

AQR Capital Management, LLC

Date Written: December 18, 2019

Abstract

Evaluating how factor premia vary over time and across assets classes is challenging due to limited time series data, especially outside of U.S. equities. We examine four prominent factors across six asset classes over a century. We find little evidence for arbitrage activity influencing returns, though some novel evidence of overfitting biases. Using a host of conditioning information motivated by theory, we identify reliable conditional factor premia across markets, particularly when imposing economic restrictions. The variation appears unrelated to macroeconomic risks. The results have important implications for asset pricing theory, supporting theories of dynamic return premia.

Suggested Citation

Ilmanen, Antti S. and Israel, Ronen and Moskowitz, Tobias J. and Thapar, Ashwin K and Wang, Franklin, How Do Factor Premia Vary Over Time? A Century of Evidence (December 18, 2019). Available at SSRN: https://ssrn.com/abstract=3400998 or http://dx.doi.org/10.2139/ssrn.3400998

Antti S. Ilmanen

AQR Capital Management ( email )

United Kingdom
+447887475184 (Phone)

Ronen Israel

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Tobias J. Moskowitz (Contact Author)

Yale University, Yale SOM ( email )

New Haven, CT 06520
United States

HOME PAGE: http://som.yale.edu/tobias-j-moskowitz

AQR Capital ( email )

Greenwich, CT
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ashwin K Thapar

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Franklin Wang

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
3,867
Abstract Views
9,824
rank
2,497
PlumX Metrics