The Battle of Factors

49 Pages Posted: 16 Jan 2024

See all articles by Kodjovi Assoe

Kodjovi Assoe

University of Quebec at Montreal (UQAM)

Najah Attig

Dalhousie University

Oumar Sy

Dalhousie University

Date Written: December 24, 2023

Abstract

This study delves into the battle of factors in Canadian capital markets, employing spanning tests to evaluate 17 factors from ten multifactor models for 1991–2022. While the value factor (HML) proves redundant, its monthly updated counterpart excels. The size factor (SMB) is not improved by discounting mispriced stocks but gains potency after controlling for profitability and investment. Q-based and mispricing factors subsume the momentum factor (UMD). No single asset-pricing model emerges dominant, except in three instances. A six-factor model including market, size, monthly updated value, ROE, expected growth, and PEAD factors proves effective for asset pricing in Canadian markets.

Keywords: factors spanning tests, Canadian stock markets, multifactor asset-pricing models

JEL Classification: G11, G12, G14, G15

Suggested Citation

Assoe, Kodjovi and Attig, Najah and Sy, Oumar, The Battle of Factors (December 24, 2023). Available at SSRN: https://ssrn.com/abstract=4675010 or http://dx.doi.org/10.2139/ssrn.4675010

Kodjovi Assoe

University of Quebec at Montreal (UQAM) ( email )

PB 8888 Station DownTown
Succursale Centre Ville
Montreal, Quebec H3C3P8
Canada

Najah Attig (Contact Author)

Dalhousie University ( email )

Rowe School of Business
6100 University Avenue
Halifax, Nova Scotia B3H 4R2
Canada
902-494-7486 (Phone)

HOME PAGE: http://scholar.google.ca/citations?user=J53887sAAAAJ&hl=en

Oumar Sy

Dalhousie University ( email )

6225 University Avenue
Halifax, Nova Scotia B3H 4H7
Canada
902-494-3849 (Phone)
902-494-1107 (Fax)

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