Noisy Factors

Abstract

The Fama-French factors are ubiquitous in empirical finance. We find that factor returns differ substantially depending on when the data were downloaded, and only a small portion of these retroactive changes is explained by revisions in the underlying data. We show that factor changes have large effects in two widely-studied contexts: cross-sectional equity pricing and mutual funds. Model evaluation tests suggest that more recent vintages do not perform better. Our findings have significant implications for the replicability and robustness of finance research.

Keywords: Fama French factors, asset pricing, performance evaluation, equities, mutual funds, model fit

JEL Classification: G10, G12, G14, G20, G31