Topic: A Comparison of New Factor Models

Speaker: Lu Zhang, Professor in Finance, Fisher College of Business, Ohio State University

Date: June 29th (Wednesday.)

Time: 2:30-4:00pm

Location: Building 4, Room 101

Language: English

Abstract:

This paper compiles an extensive data library with 437 anomaly variables. Controlling for microcaps leads to 161 significant anomalies with NYSE breakpoints and value-weighted returns and 216 with all-but-micro breakpoints and equal-weighted returns. Liquidity is largely insignificant. The q-factor model has the lowest average magnitude of (and the lowest number of significant) high-minus-low alphas among all the models. The q-factor model outperforms a competing five-factor model in explaining momentum and profitability anomalies. Fundamentals, including investment and profitability, not liquidity, are the key driving forces of the broad cross section of average stock returns.

About the speaker:

Lu Zhang holds the Max M. Fisher College of Business Distinguished Chair in Finance at the Ohio State University as well as Research Associate at National Bureau of Economics Research (Asset Pricing program). He received a Ph.D. in Finance from the Wharton School, University of Pennsylvania in 2002. Before Joining Ohio State in 2010, he taught at Stephen M. Ross School of Business at University of Michigan and William E. Simon Graduate School of Business Administration at University of Rochester. Professor Zhang’s research interests include asset pricing, corporate finance, labor economics, and capital markets research in accounting. He has articles published in the Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Accounting Research, and Journal of Political Economy among others. Professor Zhang is also an Associate Editor of the Journal of Financial Economics and Journal of Financial and Quantitative Analysis.