A Critical Investigation of the Explanatory Role of Factor Mimicking Portfolios
(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:
https://lup.lub.lu.se/record/1384597
- author
- Asgharian, Hossein LU and Hansson, Björn LU
- organization
- publishing date
- 2005
- 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
- 2016-04-01 12:19:37
- date last changed
- 2022-01-27 02:01:51
@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}}, doi = {{10.1080/09603100500166186}}, volume = {{15}}, year = {{2005}}, }