Nicola Borri, Denis Chetverikov, Yukun Liu, Aleh Tsyvinski
arXiv 11 Apr 2024 · Finance — General · 10 citations (OpenAlex)
arXiv:2404.08129 · PDF · DOI · OpenAlex · Extracted main text
We propose a new non-linear single-factor asset pricing model $r_{it}=h(f_{t}\lambda_{i})+\epsilon_{it}$. Despite its parsimony, this model represents exactly any non-linear model with an arbitrary number of factors and loadings -- a consequence of the Kolmogorov-Arnold representation theorem. It features only one pricing component $h(f_{t}\lambda_{I})$, comprising a nonparametric link function of the time-dependent factor and factor loading that we jointly estimate with sieve-based estimators. Using 171 assets across major classes, our model delivers superior cross-sectional performance with a low-dimensional approximation of the link function. Most known finance and macro factors become insignificant controlling for our single-factor.
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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 and French (1993) Common risk factors in the returns on stocks and bonds | 0.965 | 10 | 4 | 90% |
| 2 | Feng, Giglio, and Xiu (2020) Taming the factor zoo: A test of new factors | 0.928 | 5 | 3 | 80% |
| 3 | Fama and French (2015) A five-factor asset pricing model | 0.920 | 9 | 4 | 78% |
| 4 | Jegadeesh and Titman (1993) Returns to buying winners and selling losers: Implications for stock market efficiency | 0.909 | 8 | 3 | 75% |
| 5 | Ludvigson and Ng (2009) Macro factors in bond risk premia | 0.874 | 6 | 2 | 100% |
| 6 | He, Kelly, and Manela (2017) Intermediary asset pricing: New evidence from many asset classes | 0.811 | 4 | 2 | 100% |
| 7 | Lettau, Maggiori, and Weber (2014) Conditional risk premia in currency markets and other asset classes | 0.811 | 4 | 2 | 100% |
| 8 | Jensen, Kelly, and Pedersen (2023) Is there a replication crisis in finance? | 0.794 | 8 | 3 | 50% |
| 9 | Schölkopf, Smola, and Müller (1998) Nonlinear component analysis as a kernel eigenvalue problem | 0.763 | 6 | 2 | 67% |
| 10 | Fama and MacBeth (1973) Risk, return, and equilibrium: Empirical tests | 0.737 | 3 | 2 | 100% |
Showing the top 10 of 80 scored citations.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.
| Citing paper | Intensity | Mentions | Sections | |
|---|---|---|---|---|
| 1 | Beta-Sorted Portfolios | 0.405 | 1 | 1 |
| 2 | Higher-Order Asset Pricing Factors via Forward Selection Fama-MacBeth Regression | 0.405 | 1 | 1 |