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Macroeconomic risks and characteristic-based factor models.

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Macroeconomic risks and characteristic-based factor models. / Aretz, Kevin; Bartram, Söhnke; Pope, Peter.

In: Journal of Banking and Finance, Vol. 34, No. 6, 2010, p. 1383-1399.

Research output: Contribution to journalJournal articlepeer-review

Harvard

Aretz, K, Bartram, S & Pope, P 2010, 'Macroeconomic risks and characteristic-based factor models.', Journal of Banking and Finance, vol. 34, no. 6, pp. 1383-1399. https://doi.org/10.1016/j.jbankfin.2009.12.006

APA

Aretz, K., Bartram, S., & Pope, P. (2010). Macroeconomic risks and characteristic-based factor models. Journal of Banking and Finance, 34(6), 1383-1399. https://doi.org/10.1016/j.jbankfin.2009.12.006

Vancouver

Aretz K, Bartram S, Pope P. Macroeconomic risks and characteristic-based factor models. Journal of Banking and Finance. 2010;34(6):1383-1399. https://doi.org/10.1016/j.jbankfin.2009.12.006

Author

Aretz, Kevin ; Bartram, Söhnke ; Pope, Peter. / Macroeconomic risks and characteristic-based factor models. In: Journal of Banking and Finance. 2010 ; Vol. 34, No. 6. pp. 1383-1399.

Bibtex

@article{d67a41b2088742a48e9ca54080fd0acd,
title = "Macroeconomic risks and characteristic-based factor models.",
abstract = "We show that book-to-market, size, and momentum capture cross-sectional variation in exposures to a broad set of macroeconomic factors identified in the prior literature as potentially important for pricing equities. The factors considered include innovations in economic growth expectations, inflation, the aggregate survival probability, the term structure of interest rates, and the exchange rate. Factor mimicking portfolios constructed on the basis of book-to-market, size, and momentum therefore, serve as proxy composite macroeconomic risk factors. Conditional and unconditional cross-sectional asset pricing tests indicate that most of the macroeconomic factors considered are priced. The performance of an asset pricing model based on the macroeconomic factors is comparable to the performance of the Fama and French (1993) model. However, the momentum factor is found to contain incremental information for asset pricing.",
keywords = "Fama and French model, Carhart model, Asset pricing, Book-to-market, Size, Momentum, Macroeconomic factors",
author = "Kevin Aretz and S{\"o}hnke Bartram and Peter Pope",
year = "2010",
doi = "10.1016/j.jbankfin.2009.12.006",
language = "English",
volume = "34",
pages = "1383--1399",
journal = "Journal of Banking and Finance",
issn = "0378-4266",
publisher = "Elsevier",
number = "6",

}

RIS

TY - JOUR

T1 - Macroeconomic risks and characteristic-based factor models.

AU - Aretz, Kevin

AU - Bartram, Söhnke

AU - Pope, Peter

PY - 2010

Y1 - 2010

N2 - We show that book-to-market, size, and momentum capture cross-sectional variation in exposures to a broad set of macroeconomic factors identified in the prior literature as potentially important for pricing equities. The factors considered include innovations in economic growth expectations, inflation, the aggregate survival probability, the term structure of interest rates, and the exchange rate. Factor mimicking portfolios constructed on the basis of book-to-market, size, and momentum therefore, serve as proxy composite macroeconomic risk factors. Conditional and unconditional cross-sectional asset pricing tests indicate that most of the macroeconomic factors considered are priced. The performance of an asset pricing model based on the macroeconomic factors is comparable to the performance of the Fama and French (1993) model. However, the momentum factor is found to contain incremental information for asset pricing.

AB - We show that book-to-market, size, and momentum capture cross-sectional variation in exposures to a broad set of macroeconomic factors identified in the prior literature as potentially important for pricing equities. The factors considered include innovations in economic growth expectations, inflation, the aggregate survival probability, the term structure of interest rates, and the exchange rate. Factor mimicking portfolios constructed on the basis of book-to-market, size, and momentum therefore, serve as proxy composite macroeconomic risk factors. Conditional and unconditional cross-sectional asset pricing tests indicate that most of the macroeconomic factors considered are priced. The performance of an asset pricing model based on the macroeconomic factors is comparable to the performance of the Fama and French (1993) model. However, the momentum factor is found to contain incremental information for asset pricing.

KW - Fama and French model

KW - Carhart model

KW - Asset pricing

KW - Book-to-market

KW - Size

KW - Momentum

KW - Macroeconomic factors

U2 - 10.1016/j.jbankfin.2009.12.006

DO - 10.1016/j.jbankfin.2009.12.006

M3 - Journal article

VL - 34

SP - 1383

EP - 1399

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

SN - 0378-4266

IS - 6

ER -