Research Details

Abstract

We evaluate the performance of various methods for estimating factor returns in an approximate factor model. Differences across estimators are most pronounced when there is cross-sectional heteroskedasticity, or when cross-sectional sample sizes, n, are below 4,000 assets. Estimators incorporating either cross-sectional or time-series heteroskedasticity outperform the other estimators when those types of heteroskedasticity are present. The differences are most pronounced when the cross-sectional sample is small.

Type

Article

Author(s)

Zhuo Chen, Gregory Connor, Robert Korajczyk

Date Published

2018

Citations

Chen, Zhuo, Gregory Connor, and Robert Korajczyk. 2018. A Performance Comparison of Large-n Factor Estimators. Review of Asset Pricing Studies.(1): 153-182.