Best of the Best: A Comparison of Factor Models

Shamim Ahmed (Lead Author), Ziwen Bu, Daniel Tsvetanov

Research output: Contribution to journalArticle

7 Citations (Scopus)
29 Downloads (Pure)

Abstract

We compare major factor models and find that the Stambaugh and Yuan (2016) 4-factor model is the overall winner in the time-series domain. The Hou, Xue, and Zhang (2015) q-factor model takes second place and the Fama and French (2015) 5-factor model and the Barillas and Shanken (2018) 6-factor model jointly take third place. The pairwise cross-sectional R 2 and the multiple model comparison tests show that the Hou et al. (2015) q-factor model, the Fama and French (2015) 5-factor and 4-factor models, and the Barillas and Shanken (2018) 6-factor model take equal first place in the horse race.

Original languageEnglish
Pages (from-to)1713-1758
Number of pages46
JournalJournal of Financial and Quantitative Analysis
Volume54
Issue number4
Early online date14 Sep 2018
DOIs
Publication statusPublished - Aug 2019

Cite this