Cookies?
Library Header Image
LSE Research Online LSE Library Services

Semiparametric estimation of a characteristic-based factor model of common stock returns

Connor, Gregory and Linton, Oliver (2006) Semiparametric estimation of a characteristic-based factor model of common stock returns. . Suntory and Toyota International Centres for Economics and Related Disciplines, London, UK.

[img]
Preview
PDF
Download (991kB) | Preview

Abstract

We introduce an alternative version of the Fama-French three-factor model of stock returns together with a new estimation methodology. We assume that the factor betas in the model are smooth nonlinear functions of observed security characteristics. We develop an estimation procedure that combines nonparametric kernel methods for constructing mimicking portfolios with parametric nonlinear regression to estimate factor returns and factor betas simultaneously. The methodology is applied to US common stocks and the empirical findings compared to those of Fama and French.

Item Type: Monograph (Discussion Paper)
Official URL: http://sticerd.lse.ac.uk
Additional Information: © 2006 the authors
Divisions: Financial Markets Group
Economics
STICERD
Subjects: H Social Sciences > HB Economic Theory
JEL classification: G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C14 - Semiparametric and Nonparametric Methods
Date Deposited: 21 Apr 2008 11:29
Last Modified: 15 Sep 2023 23:06
URI: http://eprints.lse.ac.uk/id/eprint/4424

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics