Finance Seminar（2016-15）

Topic:A Comparison of New Factor Models

Speaker:Lu Zhang, The Ohio State University and NBER

Time:Thursday, 30 June, 10:00-11:30

Place:Room 217, Guanghua Building 2

Abstract:

This paper compiles an extensive data library with 437 anomaly variables. Controlling for microcaps leads to 161 significant anomalies with NYSE breakpoints and value-weighted returns and 216 with all-but-micro breakpoints and equal-weighted returns. Liquidity is largely insignificant. The q-factor model has the lowest average magnitude of (and the lowest number of significant) high-minus-low alphas among all the models. The q-factor model outperforms a competing five-factor model in explaining momentum and profitability anomalies. Fundamentals, including investment and profitability, not liquidity, are the key driving forces of the broad cross section of average stock returns.

Introduction:

Dr. Lu Zhang is Fisher College of Business Distinguished Chair in Finance and Professor of Finance at The Ohio State University as well as Research Associate at National Bureau of Economic Research (Asset Pricing program) and Associate Editor for Journal of Financial Economics and Journal of Financial and Quantitative Analysis. He is a cofounder (and President in 2013) of Macro Finance Society, a newly established academic society devoted to advancing and disseminating high-quality research at the intersection of financial economics and macroeconomics. Dr. Zhang’s research focuses on asset pricing, in connection with macroeconomics, corporate finance, labor economics, and capital markets research in accounting. His work elaborates a unified conceptual framework based on the neoclassical q-theory of investment for cross-sectional asset pricing. His recent work shows how labor market frictions can give rise endogenously to rare disasters.