q-Factors and Investment CAPM

Fisher College of Business Working Paper No. 2019-03-030

Charles A. Dice Working Paper No. 2019-30

37 Pages Posted: 9 Dec 2019

See all articles by Lu Zhang

Lu Zhang

Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: December 3, 2019

Abstract

The q-factor model shows strong explanatory power and largely summarizes the cross section of average stock returns. In particular, the q-factor model fully subsumes the Fama-French (2018) 6-factor model in head-to-head factor spanning tests. The q-factor model is an empirical implementation of the investment CAPM. The basic philosophy is to price risky assets from the perspective of their suppliers (firms), as opposed to their buyers (investors). As a disruptive innovation, the investment CAPM has broad-ranging implications for academic finance and asset management practice.

Keywords: the q-factor model, anomalies, EMH, behavioral finance, the investment CAPM, the consumption CAPM, the CAPM, equilibrium theory

JEL Classification: D21, D92, E22, E44, G12, G14, G31, G32, G35

Suggested Citation

Zhang, Lu, q-Factors and Investment CAPM (December 3, 2019). Fisher College of Business Working Paper No. 2019-03-030. Available at SSRN: https://ssrn.com/abstract=3497867 or http://dx.doi.org/10.2139/ssrn.3497867

Lu Zhang (Contact Author)

Ohio State University - Fisher College of Business ( email )

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National Bureau of Economic Research (NBER)

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