Abstract
While asset pricing models are theoretically motivated, they are evaluated empirically via factor-mimicking portfolios, so one set of empirical facts can be consistent with multiple theories, and construction methodology can influence the outcome. In an investigation of recent asset pricing models in Thailand, we find that higher dimension sorts with more frequent rebalancing (similar to the q-factor methodology of Hou et al., 2015) produce a value premium of 1.1% per month with t-statistic of 5.30, almost twice those of the Fama-French HML of 0.6% and 3.05. We show that our alternative asset pricing model with market risk, size, profitability and value factors constructed based on the q-factor methodology outperforms the Fama-French and the original q-factor models.
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