Abstract Stock returns are generally difficult to explain, as they are comprised of many discrete channels of risk. Empirical asset pricing models (EAPM), such as the Fama-French five-factor model (FF5), have been used to partition these channels across a series of systematic risk factors, such as company size (total market equity), value (book-to-market ratio), investment, and operating profitability. Prior EAPMs only accounted for how such factors contributed to risk at the market-level, ignoring any potential variation across sector. This study developed a sector-heterogenous model (SHM) which directly accounts for this variation by generalizing the Fama-French methodology to sector-subsets of stocks. The results demonstrated that risk is meaningfully heterogenous across sectors for each of the factors in the FF5, with different subgroups of factors being statistically significant within each sector. In a direct comparison of explanatory power, the SHM outperformed the FF5 and improved adjusted R2 by an average of 5% for stocks across all sectors. Several applications of sector-heterogeneity were then demonstrated for stock-picking purposes, including a high-beta portfolio strategy using the SHM-beta which outperformed the S&P 500 in backtesting. This study concludes that meaningful sector-heterogeneity exists in market risk. This information is materially useful to investors.

中文翻译：

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适应风险行业异质性的实证资产定价模型

摘要 股票收益通常难以解释，因为它们由许多离散的风险渠道组成。经验资产定价模型 (EAPM)，例如 Fama-French 五因子模型 (FF5)，已被用于将这些渠道划分为一系列系统性风险因素，例如公司规模（总市场权益）、价值（账面价值） -市场比率）、投资和经营盈利能力。之前的 EAPM 仅考虑了这些因素如何导致市场层面的风险，而忽略了跨部门的任何潜在变化。本研究开发了一个部门异质模型 (SHM)，该模型通过将 Fama-French 方法推广到股票的部门子集来直接解释这种变化。结果表明，对于 FF5 中的每个因素，跨部门的风险具有显着的异质性，每个部门内不同的因素子组在统计上是显着的。在解释力的直接比较中，SHM 的表现优于 FF5，并且所有行业的股票的调整后 R2 平均提高了 5%。然后展示了行业异质性的几种应用，用于选股目的，包括使用 SHM-beta 的高 beta 投资组合策略，其在回溯测试中的表现优于标准普尔 500 指数。本研究得出的结论是，市场风险中存在有意义的部门异质性。这些信息对投资者非常有用。然后展示了行业异质性的几种应用，用于选股目的，包括使用 SHM-beta 的高 beta 投资组合策略，其在回溯测试中的表现优于标准普尔 500 指数。本研究得出的结论是，市场风险中存在有意义的部门异质性。这些信息对投资者非常有用。然后展示了行业异质性的几种应用，用于选股目的，包括使用 SHM-beta 的高 beta 投资组合策略，其在回溯测试中的表现优于标准普尔 500 指数。本研究得出的结论是，市场风险中存在有意义的部门异质性。这些信息对投资者非常有用。