Covariances versus Characteristics in General Equilibrium
Key Insights
- We question a deep-ingrained doctrine in asset pricing: If an empirical characteristic-return relation is consistent with investor "rationality," the relation must be "explained" by a risk factor model.
- The investment approach changes the big picture of asset pricing.
- Factors formed on characteristi.
Show formatted citation
@misc{ acaciamarkets-research-covariances-versus-characteristics-in-general-equilibrium,
title = { Covariances versus Characteristics in General Equilibrium },
author = { NBER },
year = { 2026 },
url = { https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1908573 },
note = {Summarized and classified by AcaciaFund}
}
TY - GEN TI - Covariances versus Characteristics in General Equilibrium AU - NBER PY - 2026 UR - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1908573 ER -
Edit on GitHub — registry.json
Overview
We question a deep-ingrained doctrine in asset pricing: If an empirical characteristic-return relation is consistent with investor "rationality," the relation must be "explained" by a risk factor model. The investment approach changes the big picture of asset pricing. Factors formed on characteristics are not necessarily risk factors: Characteristics-based factor models are linear approximations of firm-level investment returns.
The evidence that characteristics dominate covariances in horse rac
Key Topics
- Market Microstructure: A theme covered by this item within the markets context.
- Quantitative Modeling: A theme covered by this item within the markets context.
Why It Matters
This item adds to the markets knowledge base. Practitioners can use it to stay current on Covariances versus Characteristics in General Equilibrium, but should validate its claims against primary sources and more recent work before relying on it in production decisions.
Key Takeaways
- Understand how Covariances versus Characteristics in General Equilibrium relates to markets workflows and controls.
- Assess evidence quality and freshness before acting on the findings.
- Use the tagged topics to connect this item to related content in the library.