This paper proposes a simple method to measure and compare the average relative return contribution of proposed risk factors. The method is applied to six common risk factors, including market, size, value, momentum, profitability, and investment, using 49 U.S. industry portfolios in the period 1969–2014. We find that the average relative return contributions of the market factor and mispricing alpha are highest in all models and sample periods. When multifactors are included, their main effect is to reduce the contribution of the average market factor return with some reduction in the contribution of mispricing alpha.
Journal of Asset Management
Knif, Johan; Kolari, James W.; Koutmos, Gregory; and Pynnönen, Seppo, "Measuring the relative return contribution of risk factors" (2019). Business Faculty Publications. 234.
Knif, Johan, James W. Kolari, Gregory Koutmos, and Seppo Pynnönen. "Measuring the relative return contribution of risk factors." Journal of Asset Management 20, no. 4 (2019): 263-272. https://doi.org/10.1057/s41260-019-00121-9
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