Measuring the relative return contribution of risk factors

Johan Knif*, James W. Kolari, Gregory Koutmos, Seppo Pynnönen

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

Abstract

This paper proposes a simple method to measure and compare the average relative return contribution of proposed risk factors. The method is applied to six common risk factors, including market, size, value, momentum, profitability, and investment, using 49 U.S. industry portfolios in the period 1969–2014. We find that the average relative return contributions of the market factor and mispricing alpha are highest in all models and sample periods. When multifactors are included, their main effect is to reduce the contribution of the average market factor return with some reduction in the contribution of mispricing alpha.
Original languageEnglish
Peer-reviewed scientific journalJournal of Asset Management
Volume20
Pages (from-to)263-272
ISSN1470-8272
DOIs
Publication statusPublished - 08.05.2019
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • risk factor models
  • CAPM
  • average relative absolute return contribution (ARARC)

Fingerprint Dive into the research topics of 'Measuring the relative return contribution of risk factors'. Together they form a unique fingerprint.

  • Cite this