Efficient Semiparametric Estimation of the Fama–French Model and Extensions

This paper develops a new estimation procedure for characteristic-based factor models of stock returns. We treat the factor model as a weighted additive nonparametric regression model, with the factor returns serving as time-varying weights and a set of univariate nonparametric functions relating security characteristic to the associated factor betas. We use a time-series and cross-sectional pooled weighted additive nonparametric regression methodology to simultaneously estimate the factor returns and characteristic-beta functions. By avoiding the curse of dimensionality, our methodology allows for a larger number of factors than existing semiparametric methods. We apply the technique to the three-factor Fama–French model, Carhart’s four-factor extension of it that adds a momentum factor, and a five-factor extension that adds an own-volatility factor. We find that momentum and own-volatility factors are at least as important, if not more important, than size and value in explaining equity return comovements. We test the multifactor beta pricing theory against a general alternative using a new nonparametric tes

Von Neumann's 'No Hidden Variables' Proof: A Re-Appraisal

Since the analysis by John Bell in 1965, the consensus in the literature is that von Neumann's 'no hidden variables' proof fails to exclude any significant class of hidden variables. Bell raised the question whether it could be shown that any hidden variable theory would have to be nonlocal, and in this sense 'like Bohm's theory.' His seminal result provides a positive answer to the question. I argue that Bell's analysis misconstrues von Neumann's argument. What von Neumann proved was the impossibility of recovering the quantum probabilities from a hidden variable theory of dispersion free (deterministic) states in which the quantum observables are represented as the 'beables' of the theory, to use Bell's term. That is, the quantum probabilities could not reflect the distribution of pre-measurement values of beables, but would have to be derived in some other way, e.g., as in Bohm's theory, where the probabilities are an artefact of a dynamical process that is not in fact a measurement of any beable of the system.Comment: 8 pages, no figures; for Peter Mittelstaedt Festschrift issue of Foundations of Physic

A six-factor asset pricing model

The present study introduce the human capital component to the Fama and French five-factor model proposing an equilibrium six-factor asset pricing model. The study employs an aggregate of four sets of portfolios mimicking size and industry with varying dimensions. The first set consists of three set of six portfolios each sorted on size to B/M, size to investment, and size to momentum. The second set comprises of five index portfolios, third, a four-set of twenty-five portfolios each sorted on size to B/M, size to investment, size to profitability, and size to momentum, and the final set constitute thirty industry portfolios. To estimate the parameters of six-factor asset pricing model for the four sets of variant portfolios, we use OLS and Generalized method of moments based robust instrumental variables technique (IVGMM). The results obtained from the relevance, endogeneity, overidentifying restrictions, and the Hausman's specification, tests indicate that the parameter estimates of the six-factor model using IVGMM are robust and performs better than the OLS approach. The human capital component shares equally the predictive power alongside the factors in the framework in explaining the variations in return on portfolios. Furthermore, we assess the t-ratio of the human capital component of each IVGMM estimates of the six-factor asset pricing model for the four sets of variant portfolios. The t-ratio of the human capital of the eighty-three IVGMM estimates are more than 3.00 with reference to the standard proposed by Harvey et al. (2016). This indicates the empirical success of the six-factor asset-pricing model in explaining the variation in asset returns

The Harari-Shupe preon model and nonrelativistic quantum phase space

We propose that the whole algebraic structure of the Harari-Shupe rishon model originates via a Dirac-like linearization of quadratic form x^2+p^2, with position and momentum satisfying standard commutation relations. The scheme does not invoke the concept of preons as spin-1/2 subparticles, thus evading the problem of preon confinement, while fully explaining all symmetries emboded in the Harari-Shupe model. Furthermore, the concept of quark colour is naturally linked to the ordering of rishons. Our scheme leads to group U(1)xSU(3) combined with SU(2), with two of the SU(2) generators not commuting with reflections. An interpretation of intra-generation quark-lepton transformations in terms of genuine rotations and reflections in phase space is proposed

A Global Potential Analysis of the 16^{16}O+28^{28}Si Reaction Using a New Type of Coupling Potential

A new approach has been used to explain the experimental data for the $^{16}$O+$^{28}$Si system over a wide energy range in the laboratory system from 29.0 to 142.5 MeV. A number of serious problems has continued to plague the study of this system for a couple of decades. The explanation of anomalous large angle scattering data; the reproduction of the oscillatory structure near the Coulomb barrier; the out-of-phase problem between theoretical predictions and experimental data; the consistent description of angular distributions together with excitation functions data are just some of these problems. These are long standing problems that have persisted over the years and do represent a challenge calling for a consistent framework to resolve these difficulties within a unified approach. Traditional frameworks have failed to describe these phenomena within a single model and have so far only offered different approaches where these difficulties are investigated separately from one another. The present work offers a plausible framework where all these difficulties are investigated and answered. Not only it improves the simultaneous fits to the data of these diverse observables, achieving this within a unified approach over a wide energy range, but it departs for its coupling potential from the standard formulation. This new feature is shown to improve consistently the agreement with the experimental data and has made major improvement on all the previous coupled-channels calculations for this system.Comment: 21 pages with 12 figure

Momentum Equity Strategies: Are Certain Firm-Specific Variables Crucial in Achieving Superior Performance in Short Term Holding Periods?

In this study we analyze the performance of variable-oriented momentum strategies, in order to detect alternatives which offer higher returns, compared to the simple price momentum strategies, for no significantly extra risk, in the very short run. Portfolios are constructed using twenty firm specific variables, of U.S. stocks traded in NYSE, NASDAQ and AMEX for a full six year period starting on March of 2002. We calculate a volatility- reward (VR) ratio for each observation, treated as a performance measure, and we apply Principal Component Analysis (PCA) on their series in order to detect the variables which contribute mostly in enhancing the performance of simple momentum strategies. Our findings suggest that short term investors could significantly benefit from momentum strategies if they take into account past firm specific information, which indirectly indicates a market underreaction to various announcements related to firms' EPS. In particular, top analysts' EPS estimate revisions followed by low P/E and high ROE contribute the most in producing momentum portfolios of superior performance, compared to a simple price momentum strategy. © EuroJournals Publishing, Inc. 2009