An examination of the characteristics versus covariance debate for contemporary asset‐pricing models: Australian evidence

Philip Gray, Manapon Limkriangkrai, Wenyuan Xu
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Abstract

As contemporary asset‐pricing models have expanded to include new factors, the empirical literature has carefully studied the time‐series fit of competing model specifications. In contrast, comparison of the roles played by characteristics and factor loadings in explaining cross‐sectional return variation has received less attention. This paper re‐examines the characteristics versus covariance debate. The findings overwhelmingly support the characteristics explanation. Firm size, book‐to‐market, profitability and investment characteristics are important for understanding differences in returns, over and above how a stock loads on common risk factors. Portfolios designed to be a pure play on a given characteristic generate economically significant trading profits.
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对当代资产定价模型的特征与协方差之争的研究:澳大利亚的证据
随着当代资产定价模型不断扩展以包含新的因子,实证文献对相互竞争的模型规格的时间序列拟合度进行了仔细研究。相比之下,比较特征和因子载荷在解释横截面收益率变化方面所起的作用则较少受到关注。本文重新审视了特征与协方差的争论。研究结果压倒性地支持特征解释。公司规模、市价账面值、盈利能力和投资特征对于理解回报率的差异非常重要,而不只是股票在共同风险因子上的加载情况。纯粹针对某一特征而设计的投资组合会产生显著的经济交易利润。
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