A Comparison of Global Factor Models

53 Pages Posted: 2 Mar 2020 Last revised: 31 Mar 2020

See all articles by Matthias X. Hanauer

Matthias X. Hanauer

Technische Universität München (TUM); Robeco Quantitative Investments

Date Written: March 29, 2020

Abstract

I compare commonly employed factor models across 50 non-U.S. developed and emerging market countries by ranking them based on their maximum Sharpe ratios. Consistent with the U.S. evidence presented in Barillas, Kan, Robotti, and Shanken (2019), I find that the factor models of Fama and French (2015, 2018), Hou, Xue, and Zhang (2015), and Stambaugh and Yuan (2017) are dominated by a six-factor model that includes cash-based profitability and momentum factors, as well as a value factor that is updated monthly. The result is robust in out-of-sample tests, across subperiods, across global regions, and to methodological changes. The main problem for the dominated factors models is that they do not explain the monthly updated value factor. Hence, I conclude that the value factor is not redundant.

Keywords: Empirical asset pricing, Factor models, Value; Momentum, Profitability

JEL Classification: G12, G14, G15

Suggested Citation

Hanauer, Matthias Xaver, A Comparison of Global Factor Models (March 29, 2020). Available at SSRN: https://ssrn.com/abstract=3546295 or http://dx.doi.org/10.2139/ssrn.3546295

Matthias Xaver Hanauer (Contact Author)

Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80290
Germany

HOME PAGE: http://www.professors.wi.tum.de/fm/team/researcher/dr-matthias-hanauer-cfa/

Robeco Quantitative Investments ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

HOME PAGE: http://www.robeco.com/en/insights/authors/matthias-hanauer.html

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