【本期主题】Taming the Factor Zoo

The asset pricing literature has produced hundreds of potential risk factors. Organizing this “zoo of factors” and distinguishing between useful, useless, and redundant factors require econometric techniques that can deal with the curse of dimensionality. We propose a model-selection method that allows us to systematically evaluate the contribution to asset pricing of any new factor, above and beyond what a high-dimensional set of existing factors explains. Our procedure selects the best parsimonious model out of the large set of existing factors, and uses it as the control in making statistical inference about the contribution of new factors. Our inference allows for model-selection mistakes, and is therefore more reliable in finite sample. We derive the asymptotic properties of our test and apply it to a large set of factors proposed in the literature. We show that despite the fact that hundreds of factors have been proposed in the last 30 years, some recent factors – such as profitability – have statistically significant explanatory power in addition to existing ones. We confirm the effectiveness of our procedure in discriminating factors in a recursive and out-of-sample experiment, and show our procedure results in a parsimonious model with a small number of factors and high cross-sectional explanatory power, even as the pool of candidate factors has expanded dramatically.

【报告人】 Dacheng Xiu

【时 间】2017年6月12日 下午15:00

【地 点】明德主楼509室

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报告人简介：

Dacheng Xiu is an associate professor of econometrics and statistics, University of Chicago, Booth School of Business. His work has been published at the Journal of Econometrics(7 times), Econometrica ，His research focuses on Financial Econometrics, Statistical Learning in Finance, Nonparametric Statistics, High-Dimensional Statistics, Quantitative Finance. He is ASSOCIATE EDITOR of Journal of Econometrics. Xiu got a B.A. in University of Science and Technology of China, a M.Sc. and a Ph.D. in Princeton University.

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