The Review of Asset Pricing Studies Vol. 8 No. 1 2018
A Performance Comparison of Large-n Factor Estimators
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 heteroscedasticity or when cross-sectional sample sizes, n, have fewer than 4,000 assets. Estimators incorporating either cross-sectional or time-series heteroscedasticity outperform the other estimators when those types of heteroscedasticity are present. The differences are most pronounced when the cross-sectional sample is small. Received December 2, 2015; editorial decision May 16, 2017 by Editor Jeffrey Pontiff.
- DOI
- 10.1093/rapstu/rax017
- Volume
- 8
- Issue
- 1
- Pages
- 153-182
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref