We propose using ETF returns as proxies for tradable risk factors in hedge fund performance evaluation, identifying contemporaneously relevant risk factors from the entire universe of ETFs. Our model provides more informative estimates of alpha and beta coefficients for predicting hedge fund...

The purpose of this study was to examine the impact of Global Financial crises on intertwining relationship among Asian, European, and American equity markets. Weekly data of 33 major stock indices was analyzed from 1 January, 2000 to 10th September, 2010. Markets were divided into three groups...

We re-examine US mutual fund performance persistence. We investigate persistence (i) using both “academic” factor models and “practitioner” index models, (ii) using decile-size recursive portfolios and also portfolios formed from smaller numbers of funds, (iii) using nonparametric...

We provide a new theory for nodewise regression when the residuals from a tted factor model areused. We apply our results to the analysis of the consistency of Sharpe Ratio estimators when there are many assets in a portfolio. We allow for an increasing number of assets as well as time...

This study developed an investment framework to implement dynamic factor rotation strategies according to changes in economic conditions. I constructed a useful macro indicator that tracked real-time business cycles of the US economy and applied a trend-filtering method to the indicator to...

We make a case that characteristics-based long-short factors should be constructed by the slope factor method rather than by sorting methods. This is because sorting does not fully control for the influence of omitted characteristics, rendering them more noisy than slope factors. In contrast,...

Our objective is to develop a methodology to price the cross section of asset returns. Despite the hundreds of systematic risk factors considered in the literature (``factor zoo''), there is still a sizable pricing error. We show that what is missing in asset-pricing factor models is not...

Recently it was shown that the news-based stock pricing model (NBSPM) outperforms the momentum-enhanced five-factor Fama-French model (FF5M) for a representative list of holdings of the major US equity sector ETFs both in-sample (Schmidt 2023) and out-of-sample (Schmidt 2022). The leading term...

This paper is based on the mathematical logic that asset returns being ratios of two consecutive prices are rational functions that cannot be averaged directly in a portfolio to match the average market returns. In this context, we study the Fama-French portfolios for the US markets and report...

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...