Testing Alphas in Linear Factor Models: A Portfolio Approach
线性因子模型的 Alpha 检验:投资组合方法AI 解读 ↓
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线性因子模型的 Alpha 检验:投资组合方法AI 解读 ↓
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This paper develops a test for evaluating linear factor models in high-dimensional settings. The proposed Maximum Random Sparse Portfolio (MRSP) test generates L random sparse portfolios, each obtained through K random draws, and then selects the hardest-to-price portfolio to assess factor model performance. By evaluating multiple randomly generated sparse portfolios, the MRSP test retains a portfolio-based economic interpretation while avoiding reliance on a single hardest-to-price asset. Under the null hypothesis and the stated regularity conditions, the centered MRSP statistic converges to a type I extreme value distribution. Monte Carlo simulations show stable finite-sample performance. In the empirical application, model fit generally improves in recent years, although the evidence varies across factor models and test assets. The 3-factor model of Daniel, Hirshleifer, and Sun (2020, Review of Financial Studies) performs best among the models considered.
高维因子定价模型的柯西聚合岭检验
In high-dimensional factor pricing models, the power of regularized alpha tests depends on the ridge parameter, whose optimal value varies with the unknown direction of pricing errors. We address this tuning uncertainty by combining ridge-specific p-values using the Cauchy rule. The resulting test retains the least-squares alpha estimator and residual sample covariance and accommodates more assets than observations. We establish the joint Gaussian limits of the component…
资产定价因子模型检验:样本外视角
We develop the Sample Splitting Alpha (SSA) test, a formal out-of-sample (OOS) test for evaluating whether an asset pricing factor model satisfies the zero-alpha restriction in high-dimensional settings. The test uses sample splitting to separate portfolio weight estimation from model evaluation and ridge regularization to stabilize the portfolio problem when the number of test assets is large. We show that each single split SSA statistic is asymptotically Gaussian under…
高维线性因子定价模型的 Lq 范数 alpha 检验
We consider testing zero pricing errors in high-dimensional linear factor pricing models. Existing methods are mainly based on either an $L_2$ statistic, which is effective under dense alternatives, or an $L_\infty$ statistic, which is powerful under very sparse alternatives. To bridge these two regimes, we develop a class of $L_q$-based tests for finite $q$, including the practically useful $L_4$ and $L_6$ cases. We show that larger $q$ leads to greater sensitivity to…
依赖观测下高维条件时变因子模型的 Alpha 检验
This paper studies alpha testing in a high-dimensional conditional time-varying factor model with temporally dependent observations. Both factor loadings and alpha processes are allowed to vary smoothly over time, and the cross-sectional dimension may be comparable to or larger than the sample size. Using a B-spline sieve method, we develop a sum-type test for dense alternatives, a max-type test for sparse alternatives, and a Cauchy combination test for adaptive inference.…
条件因子模型中高维 Alpha 的稳健空间符号检验
This paper develops a new framework for alpha testing in high-dimensional factor pricing models with time-varying coefficients. To detect sparse alternatives, we propose a spatial-sign-based max-type test and derive its limiting null distribution. A key theoretical result is that our statistic is asymptotically independent of the spatial-sign-based sum-type test proposed by Zhao (2023). Exploiting this independence, we construct an adaptive testing procedure via the Cauchy…
具有异质交互的高维空间套利定价理论
This paper investigates estimation and inference of a Spatial Arbitrage Pricing Theory (SAPT) model that integrates spatial interactions with multi-factor analysis, accommodating both observable and latent factors. Building on the classical mean-variance analysis, we introduce a class of Spatial Capital Asset Pricing Models (SCAPM) that account for spatial effects in high-dimensional assets, where we define {\it spatial rho} as a counterpart to market beta in CAPM. We then…