活动内容
Topic
Bayesian
Solutions for the Factor Zoo: We Just Ran Two Quadrillion Models
Speaker
Svetlana
Bryzgalova
Assistant Professor
of Finance, London Business School
Abstract
We propose a novel
framework for analyzing linear asset pricing models: simple, robust, and
applicable to high dimensional problems. For a (potentially misspecified)
standalone model, it provides reliable risk premia estimates of both tradable
and nontradable factors, and detects those weakly identified. For competing
factors and (possibly non-nested) models, the method automatically selects the
best specification – if a dominant one exists – or provides a model averaging,
if there is no clear winner given the data. We analyze 2.25 quadrillion models
generated by a large set of existing factors, and gain novel insights on the
empirical drivers of asset returns.
