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International factor models

Author

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  • Huber, Daniel
  • Jacobs, Heiko
  • Müller, Sebastian
  • Preissler, Fabian

Abstract

We evaluate the relative and absolute performance of competing factor-based asset pricing models in international regions and globally. Our holistic analysis controls for model transaction costs and incorporates both right-hand-side tests (based on maximum squared Sharpe ratios) and left-hand-side tests (individual return predictors, composite mispricing proxies). The overall view of the tests shows that recently proposed models tend to perform better than classical models, but otherwise perform comparably. This finding, the performance of the models in some of the LHS tests as well as further results collectively suggest the need for new powerful asset pricing models for global equity markets.

Suggested Citation

  • Huber, Daniel & Jacobs, Heiko & Müller, Sebastian & Preissler, Fabian, 2023. "International factor models," Journal of Banking & Finance, Elsevier, vol. 150(C).
    • Handle: RePEc:eee:jbfina:v:150:y:2023:i:c:s0378426623000444
    DOI: 10.1016/j.jbankfin.2023.106819
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    More about this item

    Keywords

    Asset pricing; Factor models; International stock markets;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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