Semi-strong Factors in Asset Returns

51 Pages Posted: 15 Jul 2019 Last revised: 21 Nov 2019

See all articles by Gregory Connor

Gregory Connor

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics

Robert A. Korajczyk

Northwestern University

Date Written: November 19, 2019

Abstract

We refine the approximate factor model of asset returns by distinguishing between natural rate factors, whose sum of squared factor betas grow at the same rate as the number of assets, and semi-strong factors, whose sum of squared factor betas grow to infinity, but at a slower rate. We characterize cross-sectional mean and mean-square of semi-strong factor betas, and differentiate them from natural rate factors. We apply the methodology to daily equity to characterize factors at natural rate, semi-strong, or weak.

Keywords: Semi-strong factors, Factor model

JEL Classification: G11, G12, C38

Suggested Citation

Connor, Gregory and Korajczyk, Robert A., Semi-strong Factors in Asset Returns (November 19, 2019). Michael J. Brennan Irish Finance Working Paper Series Research Paper No. 19-6, Available at SSRN: https://ssrn.com/abstract=3419446 or http://dx.doi.org/10.2139/ssrn.3419446

Gregory Connor

National University of Ireland, Maynooth (NUI Maynooth) - Department of Economics ( email )

County Kildare
Ireland

Robert A. Korajczyk (Contact Author)

Northwestern University ( email )

Kellogg School of Management
2211 Campus Drive, Room 4357
Evanston, IL 60208-0898
United States
847-491-8336 (Phone)
847-491-7781 (Fax)

HOME PAGE: http://www.kellogg.northwestern.edu/faculty/directory/korajczyk_robert.aspx#research

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