Multifactor Explanations of Asset Pricing Anomalies

asset pricing anomalies at the firm level

Anomaly is deviation from common rules and in finance it can be defined as a pattern in the average of stock return that is not consistent with the prevailing asset pricing models literature. For anomaly investigation two common methods are used: portfolio approach and individual firm approach. This paper wants to shed light on anomalies of capital asset pricing model at the individual firm lev...

Assessing Asset Pricing Anomalies

The optimal portfolio strategy is developed for an investor who has detected an asset pricing anomaly but is not certain that the anomaly is genuine rather than merely apparent. The analysis takes account of the fact that the parameters of both the underlying asset pricing model and the anomalous returns are estimated rather than known. The value that an investor would place on the ability to i...

The Arbitrage Pricing Theory and Multifactor Models of Asset Returns*

Revisiting Asset Pricing Anomalies in an Exchange Economy∗

Several well-known asset pricing anomalies arise when simple endowment economies are calibrated to real data. We show that many of these anomalies are largely mitigated, and even disappear, if we endow the representative agent with an arbitrarily small minimum consumption level. We illustrate this point in a standard one-tree Lucas exchange economy with power utility and lognormal consumption g...

Choosing Factors in a Multifactor Asset Pricing Model : A Bayesian Approach