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A Critical Investigation of the Explanatory Role of Factor Mimicking Portfolios

Asgharian, Hossein LU and Hansson, Björn LU (2005) In Applied Financial Economics 15(12). p.47-835
Abstract
The common approach for constructing factor mimicking portfolios is to go long in assets with high loadings and to short-sell those with low loadings on some background factors. As a result portfolios containing stocks with low loading on the background factor receive negative betas against the corresponding mimicking portfolio. Thus, such portfolios appear as hedges against the background risk and may in tests of asset pricing models receive significant positive intercepts. The final result regarding acceptance or rejection of an asset pricing model may therefore to some extent be understood as a random outcome.
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
in
Applied Financial Economics
volume
15
issue
12
pages
47 - 835
publisher
Taylor & Francis
external identifiers
  • scopus:24044552015
ISSN
0960-3107
DOI
10.1080/09603100500166186
language
English
LU publication?
yes
id
17e9cecd-182f-4924-835e-6a26856f1905 (old id 1384597)
date added to LUP
2009-04-20 12:27:13
date last changed
2017-01-01 05:02:44
@article{17e9cecd-182f-4924-835e-6a26856f1905,
  abstract     = {The common approach for constructing factor mimicking portfolios is to go long in assets with high loadings and to short-sell those with low loadings on some background factors. As a result portfolios containing stocks with low loading on the background factor receive negative betas against the corresponding mimicking portfolio. Thus, such portfolios appear as hedges against the background risk and may in tests of asset pricing models receive significant positive intercepts. The final result regarding acceptance or rejection of an asset pricing model may therefore to some extent be understood as a random outcome.},
  author       = {Asgharian, Hossein and Hansson, Björn},
  issn         = {0960-3107},
  language     = {eng},
  number       = {12},
  pages        = {47--835},
  publisher    = {Taylor & Francis},
  series       = {Applied Financial Economics},
  title        = {A Critical Investigation of the Explanatory Role of Factor Mimicking Portfolios},
  url          = {http://dx.doi.org/10.1080/09603100500166186},
  volume       = {15},
  year         = {2005},
}