Which factor model? A systematic return covariation perspective

Ahmed, Shamim, Bu, Ziwen, Symeonidis, Lazaros and Tsvetanov, Daniel (2023) Which factor model? A systematic return covariation perspective. Journal of International Money and Finance, 136. ISSN 0261-5606

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Abstract

We examine which factor model best captures systematic return covariation by focusing on the economic implications for portfolio risk control. The pairwise variance equality test and the model confidence set procedure suggest that the Fama and French (2015) five-factor model, the Barillas and Shanken (2018) six-factor model, and the Fama and French (2018) six-factor model are the top performers for the factor model-implied minimum risk portfolios in the out-of-sample. When it comes to the minimum tracking error portfolios, the Barillas and Shanken (2018) six-factor model and the Fama and French (2018) six-factor model are the overall winners in the horse race.

Item Type:	Article
Faculty \ School:	Faculty of Social Sciences > Norwich Business School
UEA Research Groups:	Faculty of Social Sciences > Research Groups > Finance Group
Depositing User:	LivePure Connector
Date Deposited:	28 Apr 2023 10:30
Last Modified:	12 May 2023 16:31
URI:	https://ueaeprints.uea.ac.uk/id/eprint/91907
DOI:	10.1016/j.jimonfin.2023.102865

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