Are the Fama–French factors good proxies for latent risk factors? Evidence from the data of SHSE in China
This paper applies the new procedure developed by Bai and Ng (2006a) to explore the relation between the Fama–French factors and the latent risk factors in China’s stock market. The results show that the Fama–French factors are good proxies for risk factors of portfolios. For individual stock, only the Market factor is appropriate to proxy risk factors, while the other proxies we consider are not.
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- Bai, Jushan & Ng, Serena, 2006.
"Evaluating latent and observed factors in macroeconomics and finance,"
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- Jushan Bai & Serena Ng, 2004. "Evaluating Latent and Observed Factors in Macroeconomics and Financ," Econometrics 0408007, EconWPA.
- Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
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- Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
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