Title: The effects of macroeconomic variables on the cross-section of mutual funds returns: A threshold approach
Authors: Christos Argyropoulos - Lancaster University (United Kingdom)
Bertrand Candelon - Universite Catholique de Louvain (Belgium)
Jean-Baptiste Hasse - Aix-Marseille University (France)
Ekaterini Panopoulou - University of Essex (United Kingdom)
Christos Argyropoulos - Lancaster University (United Kingdom) [presenting]
Abstract: The role of macroeconomic variables on the cross-section of mutual funds returns is investigated. Specifically, it associates macroeconomic variables with regimes, during which the Fama-French 3-factor model is stable. It thus allows testing for the stability of the asset pricing model over the macroeconomic regime. Contrary to previous studies, macroeconomic variables are not introduced as a factor, nor a benchmark but as reflecting macroeconomic conditions. We find that the linearity of the Fama-French 3-factor model is strongly rejected and that macroeconomic variables define regimes of stability for asset pricing models.