A0325
Title: Testing for weak factors in asset pricing
Authors: Soohun Kim - KAIST (Korea, South) [presenting]
Paolo Zaffaroni - Imperial College London (United Kingdom)
Valentina Raponi - IESE Business School (Spain)
Abstract: A testing framework for weak factors is provided. The novel methodology is valid as long as a large number of assets are available even for a short horizon. Applying the method to recently proposed climate-related factors, it is found that the importance of climate-related factors varies substantially over time. The inference procedures are applicable regardless of the observability of the underlying risk factors. Monte Carlo evidence supports the theoretical findings with an empirically relevant sample size.
