Take Action

Home | Faculty & Research Overview | Research

Research Details

Semi-strong factors in asset returns, Journal of Financial Econometrics

Abstract

This paper refines the approximate factor model of asset returns by dividing factors into pervasive factors, whose associated eigenvalues grow at the same rate as the number of assets, and second-order factors, whose associated eigenvalues grow but at a lower rate. We show that in a many-asset economy, second-order factor exposures are not individually identified, but it is possible to measure aggregate features of the cross-section of second-order factor exposures if the time-series sample size is also large. We apply the methodology to US equity returns using changes in exchange rates as second-order factors.

Type

Article

Author(s)

Gregory Connor, Robert Korajczyk

Date Published

2024

Citations

Connor, Gregory, and Robert Korajczyk. 2024. Semi-strong factors in asset returns. Journal of Financial Econometrics. 22(1): 70-93.

LINK
KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more