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    Semiparametric estimation of a characteristic-based factor model of common stock returns

    Connor, Gregory (2007) Semiparametric estimation of a characteristic-based factor model of common stock returns. Journal of Empirical Finance, 14 (5). pp. 694-717. ISSN 0927-5398

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    We introduce an alternative version of the Fama–French three-factor model of stock returns together with a new estimation methodology. We assume that the factor betas in the model are smooth nonlinear functions of observed security characteristics. We develop an estimation procedure that combines nonparametric kernel methods for constructing mimicking portfolios with parametric nonlinear regression to estimate factor returns and factor betas simultaneously. The methodology is applied to US common stocks and the empirical findings compared to those of Fama and French.

    Item Type: Article
    Keywords: Characteristic-based factor model; Arbitrage pricing theory; Kernel estimation; Nonparametric estimation;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 8434
    Depositing User: Gregory Connor
    Date Deposited: 11 Jul 2017 15:37
    Journal or Publication Title: Journal of Empirical Finance
    Publisher: Elsevier
    Refereed: Yes
    Use Licence: This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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