A1475
Title: Factor models for conditional asset pricing
Authors: Paolo Zaffaroni - Imperial College London (United Kingdom) [presenting]
Abstract: A methodology is developed for inference on conditional asset pricing models robust to omitted risk factors and to misspecified conditional dynamics. All the features of the asset pricing model, such as risk premia, factors exposures, factors variances and covariances, idiosyncratic risk, and number of risk factors, are potentially time-varying. The limiting results hold when the number of assets diverges but the time-series dimension is fixed, possibly very small, applicable to a variety of data frequencies. An extensive empirical application based on individual asset returns data demonstrates the powerfulness of the methodology, allowing to tease out the empirical content of the time-variation elicited by asset pricing theory.
