The competitions of time-varying and constant loadings in asset pricing models: empirical evidence and agent-based simulations

Autor: Hung-Wen Lin, Kun-Ben Lin, Shu-Heng Chen, Jing-Bo Huang
Rok vydání: 2021
Předmět:
Zdroj: Journal of Economic Interaction and Coordination. 17:577-612
ISSN: 1860-7128
1860-711X
Popis: Under two frameworks of cross-section and time-series factors, we implement asset pricing models to dissect the abnormal returns in the Chinese stock market. Our findings indicate that the model using the earnings-to-price factor outperforms the model using the book-to-market factor in the framework of cross-section factors. Moreover, we further compare the time-varying loadings with constant loadings in the asset pricing models. Existing research has implied the outperformance of time-varying loadings in the US market. However, we consider the effects of backdoor listings in the Chinese stock market. Our evidence documents that the time-varying loading factor model cannot perfectly surpass the constant loading model. Our agent-based simulations indicate that such a finding originates from the static collective behaviors and stable beliefs of the Chinese traders.
Databáze: OpenAIRE
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