Published in:Chicago Booth Research Paper ; No. 14-35
Extent:
1 Online-Ressource (47 p)
Language:
English
DOI:
10.2139/ssrn.2509529
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 1, 2015 erstellt
Description:
Variables with strong marginal explanatory power in cross-section asset pricing regressions typically show less power to produce increments to average portfolio returns, for two reasons. (i) Adding an explanatory variable can attenuate the slopes in a regression. (ii) Adding a variable with marginal explanatory power always attenuates the values of other explanatory variables in the extremes of the regression's fitted values. Without a restriction on portfolio weights, the maximum Sharpe ratios in the GRS statistic provide little information about an incremental variable's impact on the portfolio opportunity set