Investigating linear multi-factor models in asset pricing: considerable supplemental evidence*
The literature has offered an interesting debate about whether the performance of Fama-French’s three-factor benchmark model is inadequate because it fails to pass some model specification tests and its R2 is not convincingly high in cross-sectional estimations. Previous studies have been quite limi...
| Main Authors: | , , |
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| Format: | Journal Article |
| Published: |
2018
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| Online Access: | http://hdl.handle.net/20.500.11937/72674 |
| _version_ | 1848762813355393024 |
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| author | Shi, Q. Cheung, Adrian Li, B. |
| author_facet | Shi, Q. Cheung, Adrian Li, B. |
| author_sort | Shi, Q. |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | The literature has offered an interesting debate about whether the performance of Fama-French’s three-factor benchmark model is inadequate because it fails to pass some model specification tests and its R2 is not convincingly high in cross-sectional estimations. Previous studies have been quite limited, since they only focused on the time-series procedure with many models. We extend their work by providing a more robust investigation of the performance of several well-regarded pricing models in pooled portfolios and other portfolios sorted by new and important anomalies, using cross-sectional GMM tests for robustness. Finally, we find that, in addition to Fama and French’s five-factor model proposed in 1993, Fama-French’s three-factor model augmented by other factors usually outperforms Fama-French’s three-factor model across a significant proportion of different portfolios. In particular, Frazzini, Kabiller, and Pedersen’s model shows the best overall performance and consistency across different portfolios. |
| first_indexed | 2025-11-14T10:53:32Z |
| format | Journal Article |
| id | curtin-20.500.11937-72674 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T10:53:32Z |
| publishDate | 2018 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-726742019-02-08T05:36:54Z Investigating linear multi-factor models in asset pricing: considerable supplemental evidence* Shi, Q. Cheung, Adrian Li, B. The literature has offered an interesting debate about whether the performance of Fama-French’s three-factor benchmark model is inadequate because it fails to pass some model specification tests and its R2 is not convincingly high in cross-sectional estimations. Previous studies have been quite limited, since they only focused on the time-series procedure with many models. We extend their work by providing a more robust investigation of the performance of several well-regarded pricing models in pooled portfolios and other portfolios sorted by new and important anomalies, using cross-sectional GMM tests for robustness. Finally, we find that, in addition to Fama and French’s five-factor model proposed in 1993, Fama-French’s three-factor model augmented by other factors usually outperforms Fama-French’s three-factor model across a significant proportion of different portfolios. In particular, Frazzini, Kabiller, and Pedersen’s model shows the best overall performance and consistency across different portfolios. 2018 Journal Article http://hdl.handle.net/20.500.11937/72674 10.1080/16081625.2017.1419878 restricted |
| spellingShingle | Shi, Q. Cheung, Adrian Li, B. Investigating linear multi-factor models in asset pricing: considerable supplemental evidence* |
| title | Investigating linear multi-factor models in asset pricing: considerable supplemental evidence* |
| title_full | Investigating linear multi-factor models in asset pricing: considerable supplemental evidence* |
| title_fullStr | Investigating linear multi-factor models in asset pricing: considerable supplemental evidence* |
| title_full_unstemmed | Investigating linear multi-factor models in asset pricing: considerable supplemental evidence* |
| title_short | Investigating linear multi-factor models in asset pricing: considerable supplemental evidence* |
| title_sort | investigating linear multi-factor models in asset pricing: considerable supplemental evidence* |
| url | http://hdl.handle.net/20.500.11937/72674 |