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Potential pricing factors in the Korean market

Author

Listed:
  • Bang, Jeongseok
  • Kang, Yeonchan
  • Ryu, Doojin

Abstract

We examine whether new factors have explanatory power for the cross-section of expected returns compared to existing factors. Machine-learning-based double-selection LASSO determines pricing factors explaining the cross-section in the Korean stock market. Among the recently proposed factors in the factor zoo, gross profitability exhibits significant SDF loadings, as confirmed by robustness checks. We suggest that significant factors can vary across markets.

Suggested Citation

  • Bang, Jeongseok & Kang, Yeonchan & Ryu, Doojin, 2024. "Potential pricing factors in the Korean market," Finance Research Letters, Elsevier, vol. 67(PB).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009760
    DOI: 10.1016/j.frl.2024.105946
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    More about this item

    Keywords

    Asset pricing; Korean market; LASSO; Machine-learning; Stochastic discount factor;
    All these keywords.

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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