Matias D. Cattaneo, Richard K. Crump, Max H. Farrell, Ernst Schaumburg
arXiv 10 Sep 2018 · Econometrics · publishedThe Review of Economics and Statistics (2019) · 19 citations (OpenAlex)
arXiv:1809.03584 · PDF · DOI · OpenAlex · Extracted main text
Portfolio sorting is ubiquitous in the empirical finance literature, where it has been widely used to identify pricing anomalies. Despite its popularity, little attention has been paid to the statistical properties of the procedure. We develop a general framework for portfolio sorting by casting it as a nonparametric estimator. We present valid asymptotic inference methods and a valid mean square error expansion of the estimator leading to an optimal choice for the number of portfolios. In practical settings, the optimal choice may be much larger than the standard choices of 5 or 10. To illustrate the relevance of our results, we revisit the size and momentum anomalies.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Fama, E. F., and MacBeth, J. D (1973) Risk, Return, and Equilibrium: Empirical Tests | 1.000 | 8 | 4 | 100% |
| 2 | Jegadeesh, N (1990) Evidence of Predictable Behavior of Security Returns | 0.843 | 3 | 3 | 100% |
| 3 | Jegadeesh, N., and Titman, S (1993) Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency | 0.843 | 3 | 3 | 100% |
| 4 | Cochrane, J. H (2011) Discount Rates | 0.737 | 3 | 2 | 100% |
| 5 | Ibragimov, R., and Müller, U. K (2010) t-Statistic Based Correlation and Heterogeneity Robust Inference | 0.737 | 3 | 2 | 100% |
| 6 | Banz, R. W (1981) The Relationship Between Return and Market Value of Common Stocks | 0.644 | 2 | 2 | 100% |
| 7 | De Bondt, W. F. M., and Thaler, R (1985) Does the Stock Market Overreact? | 0.644 | 2 | 2 | 100% |
| 8 | Lehmann, B. N (1990) Fads, Martingales, and Market Efficiency | 0.644 | 2 | 2 | 100% |
| 9 | Kleibergen, F., and Zhan, Z (2015) Unexplained Factors and their Effects on Second Pass R-squared's | 0.511 | 2 | 1 | 100% |
| 10 | Moskowitz, T. J., and Grinblatt, M (1999) Do Industries Explain Momentum? | 0.511 | 2 | 1 | 100% |
Showing the top 10 of 43 scored citations.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.
| Citing paper | Intensity | Mentions | Sections | |
|---|---|---|---|---|
| 1 | Debiasing and $t$-tests for synthetic control inference on average causal effects | 0.405 | 1 | 1 |
| 2 | On Binscatter | 0.405 | 1 | 1 |
| 3 | Binscatter Regressions | 0.405 | 1 | 1 |
| 4 | Semiparametric Conditional Factor Models in Asset Pricing | 0.405 | 1 | 1 |
| 5 | Deep Learning for Individual Heterogeneity | 0.000 | 1 | 1 |