Abstract
The q-factor model shows strong explanatory power and largely summarizes the cross section of average stock returns. In particular, the q-factor model fully subsumes the Fama-French (2018) 6-factor model in head-to-head factor spanning tests. The q-factor model is an empirical implementation of the investment CAPM. The basic philosophy is to price risky assets from the perspective of their suppliers (firms), as opposed to their buyers (investors). As a disruptive innovation, the investment CAPM has broad-ranging implications for academic finance and asset management practice. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
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