Time-Invariance Coefficients Tests with the Adaptive Multi-Factor Model

This paper tests a multi-factor asset pricing model that does not assume the return’s beta coefficients are constants. is done by estimating generalized arbitrage theory (GAPT) using price differences. An implication of GAPT when differences instead returns, constant. We employ adaptive (AMF) to test utilizing Groupwise Interpretable Basis Selection (GIBS) algorithm identify relevant factors from among all traded exchange-traded funds. compare performance AMF with Fama–French 5-factor (FF5) model. For nearly time periods less than six years, time-invariant for model, but FF5 implies rolling window (such as five years) more consistent realized returns