Asset Pricing with Omitted Factors
Bibliographic Data
| ID | 10177595 |
|---|---|
| Authors | Stefano Giglio (0000-0002-7703-2671, Center for Economic and Policy Research), Dacheng Xiu (0000-0002-2250-0861, University of Chicago) |
| Year | 2021 |
| Volume | 129 |
| Issue | 7 |
| Pages | 1947-1990 |
| Publication date | 2021-02-24 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/714090 |
| OpenAlex | W3131102529 |
| Language | EN |
| Citations received | 3 |
| References cited | 44 |
Standard estimators of risk premia in linear asset pricing models are biased if some priced factors are omitted. We propose a three-pass method to estimate the risk premium of an observable factor, which is valid even when not all factors in the model are specified or observed. The risk premium of the observable factor can be identified regardless of the rotation of the other control factors if together they span the true factor space. Our approach uses principal components of test asset returns to recover the factor space and additional regressions to obtain the risk premium of the observed factor
Asset (computer security · Capital asset pricing model · Econometrics · Economics · Estimator · Factor analysis · Observable · Risk premium · Statistics · Computer Science · Financial Markets and Investment Strategies · Housing Market and Economics · Mathematics · Stochastic processes and financial applications
Power Enhancement in High-Dimensional Cross-Sectional Tests
The arbitrage theory of capital asset pricing
Determining the Number of Factors in Approximate Factor Models
Inferential Theory for Factor Models of Large Dimensions
A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix
Asymptotic Theory for Econometricians
Mimicking Portfolios, Economic Risk Premia, and Tests of Multi-Beta Models
Risk, Return, and Equilibrium
Liquidity Risk and Expected Stock Returns
| Citations per year | 1.5 |
|---|---|
| Citation span | 2024 - 2026 (3) |
| Highly cited | No |