Academic Events

Topic:

Estimation and Comparison of Beta-Pricing Models

Time&Date:

10:30 am -12:00 pm, April 10, 2025 (Thursday)

Venue

Room 904, Teaching Complex D Building

Speaker:

Guanhao Feng

City University of Hong Kong

We develop a Bayesian framework for estimating beta-pricing models with both traded and nontraded factors, incorporating theory-implied pricing restrictions. The framework facilitates model comparison through marginal likelihoods. Simulations show that models selected via marginal likelihoods outperform those chosen using traditional metrics like cross-sectional R² and Hansen-Jagannathan distance. Moreover, the selected model achieves superior out-of-sample tangency portfolio performance. Revisiting Kan, Robotti, and Shanken (2013), we demonstrate that the optimal specification is not FF3 but FF3 augmented with nondurable consumption growth. In comparing consumption-based models from Kleibergen and Zhan (2020), we find that all consumption measures weaken significantly when controlling for the market factor. These results highlight the relevance of the model comparison framework developed in this paper.

Biography:

Guanhao (Gavin) Feng focuses on developing methodological solutions, including machine learning, Bayesian statistics, and financial econometrics, to address big data challenges in empirical asset pricing. His work has been published in leading journals such as the Journal of Finance, Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Journal of Econometrics, and International Economic Review. He is the principal investigator for various external research grants, such as the HKRGC ECS and GRF grants, and the NSFC youth science fund. Gavin’s research has been acknowledged by practitioners, receiving research awards from INQUIRE Europe, Hong Kong Institute for Monetary and Financial Research, and the AQR Insight Award. Gavin is an associate professor of business statistics at the City University of Hong Kong. He earned his Ph.D. and MBA from the University of Chicago in 2017.