Betas V characterisitcs: do stock characteristics enhance the investment opportunity set in U.K. stock returns?

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Abstract

I use the Bayesian approach of Wang(1998) to examine if stock characteristics or factor models make a significant incremental contribution to the investment opportunity set in U.K. stock returns. The paper finds that both stock characteristics and factor models make a significant incremental contribution to the investment opportunity set for unconstrained portfolio strategies. No short selling constraints eliminates the incremental contribution of factor models but the incremental contribution of stock characteristics remains significant, whether unconditional or conditional factor models used. My study suggests that stock characteristics make the dominant contribution to the investment opportunity set of U.K. stock returns.
Original languageEnglish
Pages (from-to)114-129
Number of pages16
JournalNorth American Journal of Economics and Finance
Volume46
Early online date17 Apr 2018
DOIs
Publication statusPublished - 30 Nov 2018

Keywords

  • linear factor models
  • Bayesian test
  • stock characteristics
  • conditional models

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