Potential pricing factors in the Korean market

Jeongseok Bang; Yeonchan Kang; Doojin Ryu

doi:10.1016/j.frl.2024.105946

Potential pricing factors in the Korean market

Jeongseok Bang
, Yeonchan Kang
, Doojin Ryu

Department of Economics

Research output: Contribution to journal › Article › peer-review

7 Scopus citations

Abstract

We examine whether new factors have explanatory power for the cross-section of expected returns compared to existing factors. Machine-learning-based double-selection LASSO determines pricing factors explaining the cross-section in the Korean stock market. Among the recently proposed factors in the factor zoo, gross profitability exhibits significant SDF loadings, as confirmed by robustness checks. We suggest that significant factors can vary across markets.

Original language	English
Article number	105946
Journal	Finance Research Letters
Volume	67
DOIs	https://doi.org/10.1016/j.frl.2024.105946
State	Published - Sep 2024

Keywords

Asset pricing
Korean market
LASSO
Machine-learning
Stochastic discount factor

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10.1016/j.frl.2024.105946

Cite this

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title = "Potential pricing factors in the Korean market",

abstract = "We examine whether new factors have explanatory power for the cross-section of expected returns compared to existing factors. Machine-learning-based double-selection LASSO determines pricing factors explaining the cross-section in the Korean stock market. Among the recently proposed factors in the factor zoo, gross profitability exhibits significant SDF loadings, as confirmed by robustness checks. We suggest that significant factors can vary across markets.",

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AB - We examine whether new factors have explanatory power for the cross-section of expected returns compared to existing factors. Machine-learning-based double-selection LASSO determines pricing factors explaining the cross-section in the Korean stock market. Among the recently proposed factors in the factor zoo, gross profitability exhibits significant SDF loadings, as confirmed by robustness checks. We suggest that significant factors can vary across markets.

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KW - Korean market

KW - LASSO

KW - Machine-learning

KW - Stochastic discount factor

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Potential pricing factors in the Korean market

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Keywords

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