This digital collection includes faculty publications from the Department of Finance and Real Estate and publications from the Everitt Real Estate Center.
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Browsing Department of Finance and Real Estate by Subject "cross-section of returns"
Motivated by testing the significance of risk factors for a cross-section of returns, we develop an inferential framework which involves function-on-scalar regression. Asymptotic theory is developed assuming the factors form a weakly dependent vector-valued time series, and the regression errors are weakly dependent functions. To accommodate the empirical behavior of the cross-section of returns and of the factors, we allow both the factors and the error functions can exhibit mild departures from stationarity. This requires new asymptotic theory which leads to several tests for the significance of function-valued regression coefficients. The new approach to the study of the significance of risk factors for a cross-section of returns complements the established Fama–French approach based on portfolio construction. It is more suitable if the statistical significance of the risk factors is to be rigorously controlled.