In this study, we develop a dynamic factormodel that incorporates features
of price dynamics across assets as well as through time. With the dynamic factors
extracted via the Kalman filter, we formulate two testable asset-pricing
models: the risk-adjusted pricing model (RAPM) and the bias-adjusted pricing
model (BAPM). We then conduct asset-pricing tests in the in-sample
context. In addition, we perform out-of-sample tests for competing models,
presenting pair-wise comparisons of the accuracy in one-step-ahead forecasts.
We provide evidence that the ex post dynamic factors alone do a better job
than the Fama-French (FF, 1993) three factors both in-sample and out-ofsample.
Our analyses also demonstrate that the ex ante factors are a key
component in asset pricing and forecasting. By employing the ex ante factors
together with ex post ones, the BAPM further improves upon the explanatory
and predictive power achieved by the naive benchmark, the FF 3-factor
model, and the RAPM. In particular, the BAPM can even explain and better
forecast the momentum portfolio returns, which are mostly missed by the FF
3-factor model.
학술대회/행사
학술대회안내
[2008년 제 2차] Dynamic Factors and Asset Pricing
작성자 : 관리자
조회수 : 961
게시일 :
2008-05-30
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