Review of Financial Studies Vol. 33 No. 5 2020

Comparing Cross-Section and Time-Series Factor Models

Eugene F. Fama¹; Kenneth R. French²

¹ Booth School of Business, University of Chicago · ² Amos Tuck School of Business, Dartmouth College

Abstract

We use the cross-section regression approach of Fama and MacBeth (1973) to construct cross-section factors corresponding to the time-series factors of Fama and French (2015). Time-series models that use only cross-section factors provide better descriptions of average returns than time-series models that use time-series factors. This is true when we impose constant factor loadings and when we use time-varying loadings that are natural for time-series factors and time-varying loadings that are natural for cross-section factors.

DOI

10.1093/rfs/hhz089

Volume

33

Issue

5

Pages

1891-1926

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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