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Journal ArticleDOI

Characteristics Are Covariances: A Unified Model of Risk and Return

TLDR
In this paper, the authors propose an instrumented principal component analysis (IPCA) model that allows for latent factors and time-varying loadings by introducing observable characteristics that instrument for the unobservable dynamic loadings.
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This article is published in Journal of Financial Economics.The article was published on 2019-12-01. It has received 262 citations till now. The article focuses on the topics: Factor analysis.

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Citations
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Empirical Asset Pricing via Machine Learning

TL;DR: Improved risk premium measurement through machine learning simplifies the investigation into economic mechanisms of asset pricing and highlights the value of machine learning in financial innovation.
Journal ArticleDOI

Empirical Asset Pricing via Machine Learning

TL;DR: The authors performed a comparative analysis of machine learning methods for the canonical problem of empirical asset pricing: measuring asset risk premia, and demonstrated large economic gains to investors using machine learning forecasts, in some cases doubling the performance of leading regression-based strategies from the literature.
Journal ArticleDOI

Shrinking the cross-section

TL;DR: In this paper, a robust stochastic discount factor (SDF) summarizing the joint explanatory power of a large number of cross-sectional stock return predictors is proposed.
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Taming the Factor Zoo: A Test of New Factors

TL;DR: This article proposed a model selection method to systematically evaluate the contribution to asset pricing of any new factor, above and beyond what a high-dimensional set of existing factors explains, and applied their procedure to a set of factors recently discovered in the literature.
Journal ArticleDOI

Autoencoder asset pricing models

TL;DR: This model retrofits the workhorse unsupervised dimension reduction device from the machine learning literature – autoencoder neural networks – to incorporate information from covariates along with returns themselves, and delivers estimates of nonlinear conditional exposures and the associated latent factors.
References
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Journal ArticleDOI

Common risk factors in the returns on stocks and bonds

TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
Journal ArticleDOI

Risk, Return, and Equilibrium: Empirical Tests

TL;DR: In this article, the relationship between average return and risk for New York Stock Exchange common stocks was tested using a two-parameter portfolio model and models of market equilibrium derived from the two parameter portfolio model.
Journal ArticleDOI

On Persistence in Mutual Fund Performance

Mark M. Carhart
- 01 Mar 1997 - 
TL;DR: Using a sample free of survivor bias, this paper showed that common factors in stock returns and investment expenses almost completely explain persistence in equity mutual fund's mean and risk-adjusted returns.
Journal ArticleDOI

The arbitrage theory of capital asset pricing

TL;DR: Ebsco as mentioned in this paper examines the arbitrage model of capital asset pricing as an alternative to the mean variance pricing model introduced by Sharpe, Lintner and Treynor.
Trending Questions (1)
What is the cross-sectional relationship between stock returns and industry characteristics?

The paper does not directly address the cross-sectional relationship between stock returns and industry characteristics.