International Factor Models

Abstract

We evaluate the relative and absolute performance of eight competing neo-classical or behavioral asset pricing models in four regions (North America, Europe, Asia-Pacific and Japan). Our holistic analysis incorporates both right-hand-side tests (based on maximum squared Sharpe ratios as suggested in Barillas et al., 2020 and Fama and French, 2018) and lefthand-side tests (240 individual anomalies, two composite mispricing proxies). While recently proposed models as well as the behavioral approaches generally tend to perform better than classical models, there is no dominating approach. This finding and further results point to the need for new powerful global asset pricing models.